The Dow Jones Industrial Average fell 229 points, or 1.9%, to 11565 in Monday-morning trading, with all 30 blue-chip components in the red. The Dow was down 0.11% for 2011 as of mid-morning. The Standard & Poor's 500-stock index shed 23 points, or 1.9%, to 1193 and the Nasdaq Composite slid 53 points, or 2.1%, to 2519. Financial stocks fell the hardest, followed by the industrial and technology sectors.
Trading volume in the downdraft was relatively thing, with about 750 million shares changing hands in New York Stock Exchange composite volume as of 10:30 a.m. ET. The daily average is north of 4 billion.
The U.S. supercommittee, charged with reducing the budget deficit by at least $1.2 trillion over the next 10 years or else trigger automatic spending cuts, is facing almost certain collapse. Besides the uncertainty over the size of the eventual cuts, if any, investors were concerned over the chance for downgrades to the U.S. credit rating. Standard & Poor's downgrade of the U.S. government in early August helped trip off that month's stock-market declines and the market volatility that has since persisted.
"There's a sense that the U.S. economy is looking down the barrel of a gun but [Washington] cannot figure out what to do," said Peter Kenny, managing director at Knight Capital Group. "These downgrades are coming, as sure as the sun comes up tomorrow. They're a foregone conclusion."
Demand for U.S. Treasury bonds jumped, sending yield on the 10-year note down to 1.9682%. The U.S. dollar rose against the euro but eased against the yen.
"It's worry in the process itself," said Rick Bensignor, chief market strategist at Merlin Securities. "You can't just buy stocks because they're cheap. When you have macro world events occuring, you can't just get away with saying, 'This stock is cheap, let's buy it.' That's a recipe for disaster in a scenario like this."
Europe markets were sharply lower, with the Stoxx Europe 600 down 2.6%, on those fears of debt-crisis contagion. Moody's Investors Service said it may change its stable outlook on France's triple-A rating to negative in the coming months, and that German banks have sizeable exposures to troubled euro-zone countries.
Meanwhile, Germany's Bundesbank cut its 2012 growth forecast for the German economy to between 0.5% and 1% from the 1.8% growth predicted in June.
Asian bourses also declined, with Japan's Nikkei Stock Average losing 0.3% and Hong Kong's Hang Seng Index giving up 1.4%.
Gold futures fell 1.2% to $1,704.60 an ounce, while crude oil futures lost 1.6% to $96.10 a barrel.
On the economic calendar, data on sales of existing homes in October is scheduled for release at 10:00 a.m. ET.
In corporate news, shares of Pharmasset soared 85% after the drug developer agreed to be acquired by Gilead Sciences in a deal valued at about $10.4 billion. Gilead shares fell 11%.
Transatlantic Holdings climbed 1.5% after the reinsurance company agreed to be acquired by Alleghany in a stock and cash deal valued at about $3.4 billion.
The U.S.-listed shares of China's Global Education shot up 95% after U.K. publishing giant Pearson agreed to buy the test-preparation services company for $155 million in cash.
Clearwire is in discussions with restructuring advisers, people familiar with the matter told The Wall Street Journal, as the money-losing wireless carrier wrestles with a large debt payment coming due Dec. 1. Shares were up 12%. For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
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