Why the Dow Is Tanking

As the second week of 2012 comes to a close, markets will have to rally back if they want to end on a positive note. Disappointing earnings from a major Wall Street bank and renewed fears concerning the European Union combined to lead all three major indexes lower.

But before we jump into the morning's events, let's see how the three largest indexes are faring after the first hour of trading.

All three indexes have erased yesterday's gains and then some. We are also seeing declines in the euro, 10-year Treasuries, gold, and oil (which is now under $98.50 a barrel). Every one of the 30 Dow stocks is in the red as Standard & Poor's prepares to lower the credit ratings of several European nations.

It appears the optimism ahead of earnings season -- especially after Alcoa put out decent guidance earlier in the week -- is gone. JPMorgan Chase (NYSE: JPM) witnessed a 23% drop in earnings for the fourth quarter, sending shares down 4%. Investment banking revenue was cut by nearly a third and its mortgage division has returned to racking up losses, but the bank did see an increase in loan growth, which could be a sign the economy is improving. Since JPMorgan is considered one of the better-managed operators, it's no surprise that the Direxion Financial Bull 3X (NYSE: FAS) levered ETF is plunging down more than 5% as banks across the board are getting slaughtered.

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