November 21, 2011 / 5:19 AM / 6 years ago

Markets dive as debt rattles investors

NEW YORK (Reuters) - Wall Street stocks skidded on Monday, extending losses from across Europe as fears over out-of-control government debt on both sides of the Atlantic hit financial markets.

Commodity prices also fell.

Wall Street hit a month-low as the S&P 500 index .SPX fell 2.5 percent, dropping below the 1,200-point level for the first time since October.

The Dow and tech-heavy Nasdaq indices each lost nearly 3 percent, following through on last week’s declines as a congressional “super committee” was expected to concede defeat in its bid to lower the U.S. deficit.

U.S. oil prices traded at around $96 barrel, down 1.3 percent, after falling 2 percent earlier.

Gold futures lost more than 2 percent, breaking below $1,700 an ounce. The precious metal is on course for an 18 percent loss on the year. <O/R> <GOL/>

Investors took refuge in safe-havens, pushing yields on benchmark 10-year U.S. bonds down to 1.95 percent from 2.01 percent on Friday. <US/>

The dollar hit a six-week high versus a currency basket .DXY but then pared some of its gains after data showed U.S. existing home sales unexpectedly rose in October as low mortgage interest rates and rising rents led more homebuyers into the market.

Light trading volume, expected throughout the week due to Thursday’s U.S. Thanksgiving holiday, could add to market volatility, traders said. .N

“These days it’s pretty hard to have confidence in the political side of things ” said Rick Bensignor, chief market strategist at Merlin Securities in New York. “If you just don’t have enough buyers stepping in then it doesn’t take a lot of sellers to make market move down.”

Around 12:20 p.m. EST (1720 GMT), the Dow Jones industrial average .DJI was down 304.33 points, or 2.58 percent, at 11,491.83. The Standard & Poor’s 500 Index .SPX was down 28.01 points, or 2.30 percent, at 1,187.64. The Nasdaq Composite Index .IXIC was down 62.80 points, or 2.44 percent, at 2,509.70.

Merger activity provided a bright spot as Pharmasset Inc VRUS.O surged 84.8 percent to $134.30 after Gilead Sciences Inc (GILD.O) agreed to buy the company for $11 billion in cash. Gilead slumped 11.8 percent to $35.18.

In Europe, stocks hit 6-week lows as Moody’s warned about France’s rating outlook and Spanish yields rose following election of a new government.

World stocks as measured by MSCI .MIWD00000PUS were down 2.5 percent for a 12 percent year-to-date loss. More volatile emerging market stocks .MSCIEF lost 2.8 percent.

In Europe -- the heart of the debt storm -- the FTSEurofirst 300 .FTEU3 index tumbled 3.1 percent, bringing it down more than 17 percent lower for the year.

Additional reporting by Chuck Mikolajczak, Jeremy Gaunt, Blaise Robinson and Kirsten Donovan; Editing by Dan Grebler

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