NEW YORK (MarketWatch) — U.S. stocks fell Monday as investors worried about Europe’s debt crisis and the debate over lifting the U.S. debt ceiling ahead of a big week for corporate results.

The Dow Jones Industrial Average DJIA, +1.19% fell 94.57 points, or 0.8%, to 12,385.16, with 29 of 30 components ending lower.

The Dow last week lost 177.44 points, or 1.4%, capping its worst week in more than a month.

Uncertainty surrounding high government debt levels in Europe and the U.S., and growing wariness about lawmakers’ ability to deal with them, has been pressuring stocks.

“Politicians on both sides of the Atlantic are not explaining realities to the voters, and this lack of leadership, as much as anything, remains a barrier to improvements in both market and economic prospects,” said David Kelly, chief market strategist at J.P. Morgan Funds.

“The reality is that any solution to U.S. debt problems will require a disciplined plan to both cut entitlement spending and raise taxes over a number of years. Any solution to the European debt problem will eventually require the richer nations in Europe to subsidize the budgets or at least the borrowing costs of their more troubled brethren,” Kelly added.

Bank of America Corp. BAC, +1.34% led blue-chip losses with a drop of 2.8% after Bloomberg reported the bank may need to build its capital reserves by $50 billion and break its chief executive officer’s vow to hike the firm’s dividend due to mortgage losses.

Bank of America reports earnings on Tuesday, and is one of more than 100 companies in the S&P 500 slated to report quarterly results this week.Read Bank of America earnings preview.

“Despite an economy which appears to have grown by just 2% annualized in the first half of 2011, corporate profits have continued to surge,” noted Kelly at J.P. Morgan Funds.

The Standard & Poor’s 500 Index SPX, +0.82% declined 10.7 points, or 0.8%, to 1,305.44, with financial firms leading losses that swept up all of the index’s 10 industry groups.

The Nasdaq Composite Index COMP, +0.74% was off 24.69 points, or 0.9%, at 2,765.11.

For every stock gaining, five fell on the New York Stock Exchange, where volume topped 874 million.

Wall Street’s worries

Investors’ concerns included Europe’s debt crisis and debt-ceiling talks in Washington, where lawmakers face an Aug. 2 deadline for raising the debt limit.

In Europe, European Union leaders plan a summit on Thursday as they attempt to prevent the region’s troubles from spreading.

“Concerns about debt in Greece, Portugal, Ireland and Spain have now spread to Italy,” said Kelly at J.P. Morgan Funds.

In Washington, House Republicans have set a vote for Tuesday on what could prove to be a symbolic gesture, as Democratic leaders say the GOP’s plan cannot pass the Senate.

“While the vast majority of lawmakers recognize that not raising the debt ceiling would lead to economic and financial disaster, the negotiating parties appear willing to tussle all the way down to the wire,” said Kelly. Read story about debate over hiking the nation’s borrowing limit.

On the New York Mercantile Exchange, oil futures CL1Q fell to just under $96 a barrel, and gold futures GC1Q closed at a record $1,602.40 an ounce.

Stocks continued their slide after a measure of builder confidence showed a bit of improvement in July, with the National Association of Home Builders sentiment index rising two points to 15 in July.

“The number is well below the break even level of 50 that separates growth from contraction. The poor state of the industry is at the same time no news to anyone,” said Peter Boockvar, equity strategist at Miller Tabak.

Financial stocks were particularly hard hit Monday, weighed by concerns that recent European bank stress tests under-represented banks’ sensitivity to a sovereign-debt default and a selloff in insurer stocks.

Genworth Financial Inc. GNW, -4.28% fell 7.6%, leading decliners on the S&P 500, after fellow mortgage insurer MGIC Investment Corp. MTG, +1.37% reported a loss as loan defaults rose. Read more on financial stocks.

Allstate Corp. ALL, +0.74% shares slid 5% on uncertainty over a management shake-up. Read more on movers and shakers.