NEW YORK (TheStreet) -- The major U.S. stock indices were down more than 2% Monday afternoon on the political stalemate over U.S. deficit cuts and lingering worries about European debt.
The Dow Jones Industrial Average fell 310 points, or 2.6%, at 11,487. The weakest blue-chip performers were Boeing (BA), Caterpillar (CAT)and Hewlett-Packard (HPQ).
The S&P 500, which dipped below 1200 for the first time since late October, was losing 28 points, or 2.3%, at 1188. Technical analysts are looking for the S&P 500 to hold the 1180 level after breaking through several key technical levels in the prior week. Industrials, energy and financial stocks were leading the index lower.
The tech-heavy Nasdaq shed 61 points, or 2.4%, to 2511.
"In times of great uncertainty traders tend to focus more on charts and technicals," said Lou Brien, a market strategist at DRW Trading. "The S&P has fallen under more technical support and the charts seem to suggest that 1183 is the next key level to the downside."
On top of consternation about Europe's debt crisis, the inability of U.S. lawmakers to come to a compromise on deficit cuts was also pressuring stocks. With two hours left in the session, more than 2.23 billion shares had traded on the New York Stock Exchange
and more than 1.21 billion on the Nasdaq
The congressional panel tasked with cutting the U.S. deficit by more than $1 trillion over the next decade is deadlocked over taxes. The so-called super committee is widely expected to announce a failure to reach its budget-saving goal on Monday, ahead of its Nov. 23 deadline for agreeing on a plan, according to Bloomberg
"There was no great news from Europe over the weekend. The fact that the budget committee is throwing in the towel already suggests lawmakers weren't even close," said Uri Landesman, president of New York-based hedge fund Platinum Partners. Landesman added that consumer confidence and hope for possible stimulus from the Federal Reserve are some of the "last weapons" for the market.
The super committee's impasse is setting a downbeat tone for the shortened Thanksgiving week. Still, the news is hardly a surprise as many investors had low expectations that lawmakers would find a way to cooperate. Furthermore, it is unclear what immediate effect the super committee's failure will have on the U.S. heading into the election year.
"The key issue for the U.S. public finances is the plunge and subsequent weak recovery in tax revenues," according to Ian Shepherdson, economist with High Frequency Economics. "Stronger growth would change that picture quite quickly regardless of what the Super Committee does or does not do."
Investors have continued to seek safety in the greenback with the perception that the U.S. will make good on its debt payments. According to Bloomberg
, foreign banks doubled their dollar deposits at the Federal Reserve so far this year and the greenback has appreciated 7.2% since the U.S. lost its triple A credit rating from Standard & Poor's in early August.
"There are few alternatives for international investors other than the Treasuries. This is both a safe haven trade in case of a near term fiasco in Europe, but it is also a matter of the last man standing for those accounts, such as Pension Funds, Insurance Companies, etc, who are natural buyers of fixed income," said DRW Trading's Brien.
Credit Suisse issued a research note saying the euro is likely facing its "last day" as debt fears spread to larger nations.
European stocks fell sharply overnight. London's FTSE fell 2.6% and Germany's DAX lost 3.4%. Overnight, Asian stocks closed down as Japanese exports fell for the first time in three months, and economic growth in Singapore was projected to slow. Japan's Nikkei Average was down 0.3%, and Hong Kong's Hang Seng was down 1.4%.
The threat of unsustainable borrowing costs in Italy, Spain and France already put investors on heightened alert last week. Stocks put in their worst week in about two months, with the Dow losing almost 3% and the S&P falling almost 4%. On the bright side, eurozone officials may be considering ways to fund their emergency rescue fund by allowing the European Central Bank to take on an expanded role.
In corporate news, Gilead Sciences (GILD) agreed to buy Pharmasset (VRUS)
in a deal worth $11 billion. The transaction price of $137 a share in cash is an 89% premium to Pharmasset's closing price Friday of $72.67. Pharmasset was jumping 84.6%.