1:15pm (EST)   

The market fell sharply after worries over Europe’s debt crisis started gaining traction again.  European markets tanked before the close after Standard & Poor’s downgraded the debt of Portugal and Greece.

The rating agency’s move intensified fears that Europe’s debt problems are spreading and we knew sooner or later the PIGS would show up again (Ireland and Spain make up the final two).  This has helped the bears case as the bulls try to hold key support levels.

As a result, the Dow is currently down 133 points, or 1.2%, 11,071; the S&P 500 is off by 18 points, or 1.5% to 1,193; the Nasdaq is lower by 36 points or 1.4%, and is at 2,487.

The curveball from overseas offset some good economic news.  The Conference Board’s consumer confidence index jumped to 57.9 in April versus expectations it would rise to 53.5.

The downgrades on Greece and Portugal drew some of the market’s attention away from testimony by Goldman Sachs’ (GS, $152.91, up $0.88) top executives on Capitol Hill.  The executives are getting grilled and seem vague about the company’s dealings in mortgage-backed securities during the credit crisis.  However, all Goldman was doing was making a market for the short-sellers.

The Securities and Exchange Commission has charged Goldman with civil fraud, accusing it of misleading investors about investments tied to subprime mortgages but it all comes down to if Goldman should have disclosed their positions.

Look, every trade has a buyer and a seller and we aren’t so sure Goldman made bets against its clients like Washington believes.

We have a lot to cover in our Members Area and it has been a busy day.  We expect that to continue for the rest of the week. We will be back in the morning with a full update.