* VIX spikes on concerns over U.S., euro-zone debt
* Financials sell off; Alcoa down ahead of earnings
* News Corp tumbles on uncertainty over BSkyB deal
* Dow off 1.4 pct, S&P down 1.9 pct, Nasdaq off 2.2 pct * For up-to-the-minute market news see [STXNEWS/US] (Updates to late afternoon trading; changes byline)
By Angela Moon
NEW YORK, July 11 (Reuters) - Wall Street was on track to post its biggest loss in about a month on Monday on worries about the lack of progress in the U.S. budget talks and the mounting euro-zone debt crisis.
The broad sell-off pushed the S&P 500 near its 100-day moving average.
The S&P 500 was down nearly 2 percent on renewed concerns that Europe's debt crisis would spread to Italy. In addition, a rise in Chinese inflation and an impasse in U.S. budget talks jolted investors after Friday's weak jobs report.
But some technical analysts view the market's slide as a healthy retreat.
"We are in a headline-driven market so I don't think the decline (today) is the start of a longer-term trend," said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research in Cincinnati.
"We continue with the 'one step back, two steps forward' trend. Until we see the S&P steadily hold above the 1,333 (mark), we are likely to see this kind of sideways consolidations."
The Dow Jones industrial average <.DJI> was down 173.99 points, or 1.37 percent, at 12,483.21. The Standard & Poor's 500 Index <.SPX> was down 25.69 points, or 1.92 percent, at 1,318.11. The Nasdaq Composite Index <.IXIC> was down 61.43 points, or 2.15 percent, at 2,798.38.
The S&P 500, which lost its gains for the month, was near its 100-day and 50-day moving averages, both around the 1,316 level. The Dow and Nasdaq remained modestly in the plus column.
Dashing hopes for a deal on larger-than-expected spending cuts to tame the U.S. budget deficit, a highly anticipated Sunday meeting broke little new ground as President Barack Obama and congressional Republicans kept sparring over taxes. In a press conference, Obama called for the largest possible deficit-reduction deal. For details, see [ID:nUSBUDGET]
While investors still consider it unlikely there will be no deal on the debt, the lack of resolution at a time of growing international concerns weighed on sentiment. The CBOE Volatility Index <.VIX> or VIX, Wall Street's barometer of investor anxiety, spiked 18.4 percent, though volume remained at lighter-than-average levels.
Financials and other economically sensitive stocks fell.
Bank of America Corp
Global equity markets fell and the cost of insuring Italian debt jumped to a record amid fears of contagion in Europe's debt markets and reports some European Union leaders were considering allowing a selective default by Greece. [ID:nL6E7IB090]
U.S. exchange-traded funds tracking European equity
markets came under heavy selling pressure. The IShares MSCI
Italy Index Fund
Alcoa Inc
For a video on the upcoming season, see: http://link.reuters.com/caw52s
"Earnings take on increased significance with all these macro issues going on, and it could potentially be a positive for investors to get behind if Alcoa gives a good number," said Walter Todd, who helps manage $950 million at Greenwood Capital in Greenwood, South Carolina.
Todd added that recent equity gains "heighten the pressure for earnings to be good."
News Corp