Business

Dow drops nearly 250 points amid deficit worries

Stocks tumbled to the lowest closing level of the month Monday, as investors reacted to the deadlock in US congressional deficit talks, sending the Dow Jones Industrial Average back into negative territory for the year.

The blue-chip Dow finished down 248.85 points, or 2.1 percent, at 11547.31, the lowest close since Oct. 20. All 30 blue-chip components lost ground as the Dow hurtled lower, with the average now down 0.3 percent for 2011.

The Standard & Poor’s 500-stock index shed 22.67 points, or 1.9 percent, to 1192.98, while the technology-oriented Nasdaq Composite slid 49.36 points, or 1.9 percent, to 2523.14. Both the S&P 500 and Nasdaq closed at their lowest levels since Oct. 7.

Investors watched as the US supercommittee inched closer to a Nov. 23 deficit-cutting deadline without visible progress. There was concern over the chance of downgrades to the US credit rating as well as the economic growth impact in the event $1.2 trillion in automatic cuts take effect, as they were slated to do if an agreement wasn’t reached.

“There’s a sense that the US 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.”

The sudden focus on US deficit negotiations came as fears on the eurozone debt crisis also sharpened.

European markets fell broadly Monday, with the Stoxx Europe 600 losing 3.2 percent. 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 sizable exposures to troubled eurozone countries.

The election of a fiscally conservative government in Spain failed to calm eurozone bond markets, as Spanish borrowing costs marched close to their highest levels since the onset of Europe’s sovereign debt crisis.

Meanwhile, Germany’s Bundesbank cut its 2012 growth forecast for the German economy to between 0.5 percent and one percent, from the 1.8 percent growth predicted in June.