NEW YORK ( TheStreet) -- The Dow Jones Industrial Average slid back into negative territory for the year in afternoon action on Monday as political deadlock over U.S. deficit cuts and ongoing uncertainty in Europe fueled a deep pullback in stocks.

The market was near session lows in midday trading. The blue-chip index was down 300 points, or 2.6%, at 11,496. Sinking to the bottom of the Dow 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, financial stocks were leading the index lower. The SPDR exchange-traded funds for those sectors were down 3.2%, 3.1% and 2.8%, respectively.

The tech heavy Nasdaq was shedding 60 points, or 2.4%, to 2512.

On top of consternation about Europe's debt crisis, debt matters in the U.S. are pressuring stocks. Trading was thin given the shortened week ahead of Thanksgiving holiday. With three hours left in the session, some 1.9 billion shares had traded on the New York Stock Exchange and 1 billion on the Nasdaq.

A panel in Washington D.C. tasked with cutting the U.S. deficit by more than $1 trillion over the next decade is deadlocked over taxes. The U.S. super committee is expected to announce that it failed 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 sets a downbeat tone for the shortened Thanksgiving week. However, the news hardly comes as a surprise for many investors who had low expectations for lawmakers to accomplish much. Furthermore, it is unclear what immediate effect the super committee's failure will have on the U.S. heading into the election year.

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.

"The key issue for the U.S. public finances is the plunge and subsequent weak recovery in tax revenues," according to Ian Sheperdson, economist with High Frequency Economics. "Stronger growth would change that picture quite quickly regardless of what the Super Committee does or does not do."

Credit Suisse issued a research note saying the euro is likely facing its "last day" as debt fears spread to larger nations. European stocks were down sharply with London's FTSE off 2.5%, and Germany's DAX plunging 3.2%. 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 85%.

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