Sell-off runs into fourth day on Europe, U.S. debt worries

NEW YORK Mon Nov 21, 2011 5:51pm EST

Traders work on the floor of the New York Stock Exchange November 21, 2011.       REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange November 21, 2011.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - U.S. stocks fell for a fourth session on Monday, as the lack of progress in dealing with heavy debt both in the United States and Europe further sapped investor confidence in equities.

Risky assets like commodities also fell, sparking a sell-off in shares of industrials and energy companies. Volume was lower than average, with investors more inclined to sit on the sidelines amid the uncertainty.

Late on Monday, the co-chairs of a U.S. congressional "super committee" said they have failed to reach a deal on reducing federal government deficits.

"The news was pretty much out yesterday. No one was expecting anything," said Kevin Kruszenski, director of equity trading at KeyBanc Capital Markets in Cleveland.

"Will this continue to have an impact tomorrow? Well, it does add to the overall malaise, but I don't see this being something of unexpected."

The Dow Jones industrial average .DJI slid 248.85 points, or 2.11 percent, to end at 11,547.31. The Standard & Poor's 500 Index .SPX lost 22.67 points, or 1.86 percent, to finish at 1,192.98. The Nasdaq Composite Index .IXIC dropped 49.36 points, or 1.92 percent, to close at 2,523.14.

There are concerns that the stalemate will make it more difficult to pass extensions of stimulative measures like payroll tax cuts, which could hurt the U.S. economy. In addition, investors are worried that the committee's inability to come to an agreement could result in another downgrade of the U.S. credit rating, though so far the major rating agencies have not commented.

Moody's Investors Service said a recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for France's credit rating.

S&P 500 OFF 5 PCT FOR YEAR

Blue chips, which have been outperforming smaller-cap stocks, fell the most in Monday's slide, with the Dow tumbling more than 300 points to its session low.

The Dow was off 0.3 percent for the year. The S&P 500 and the Nasdaq are off about 5 percent each for the year to date.

The S&P quickly fell through the 1,200 level seen as the next level of support. After that, support was seen at 1,187, representing the 61.8 percent retracement of the 2011 high to low slide.

Rick Bensignor, chief market strategist at Merlin Securities in New York, said the negative headlines from across the globe made it less likely the market would see a sustained rally despite stocks having what many traders say are attractive valuations.

"Cheap valuations only do so much. They don't make bull markets. They make bidders to curtail down markets, but in and of themselves, the fact that stocks are cheap is not a good enough reason to think that they are going to go higher."

Among blue-chip stocks, Bank of America (BAC.N) fell 5 percent to $5.49.

On the Nasdaq, Amazon.com Inc (AMZN.O) shares lost 4 percent to $189.25.

HP BUCKS TIDE, RALLIES LATE

After the closing bell, Hewlett-Packard (HPQ.N) reported quarterly results that beat Wall Street's expectations. The stock rose 2.4 percent to $27.50 in extended trade.

In Europe, the FTSEurofirst 300 .FTEU3 index fell 3.3 percent to its lowest close in nearly seven weeks. Along with the new concerns about France, Spain's bond yields rose despite a clear-cut victory for austerity-committed conservatives in Sunday's election. There were few details on Prime Minister-elect Mariano Rajoy's plans.

About 7.78 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the current daily average of 8 billion shares.

On the New York Stock Exchange, about six stocks fell for every one that rose. On the Nasdaq, decliners beat advancers by 5 to 1.

Merger activity provided a bright spot as Pharmasset Inc VRUS.O surged 84.6 percent to $134.14 after Gilead Sciences Inc (GILD.O) agreed to buy the company for $11 billion in cash. Gilead slumped 9.1 percent to $36.26.

Economic data showed U.S. existing-home sales unexpectedly rose in October as low interest rates for mortgages and rising rents encouraged more people to buy homes, a trade group said, but equities were little helped by the data.

(Reporting by Angela Moon; Editing by Kenneth Barry and Jan Paschal)