Wall Street Down 2 Percent on Global Debt Concerns

U.S. stocks dropped about 2 percent on Monday, putting the S&P on track for its fourth straight day of losses as concerns about heavy debt loads both domestically and abroad added uncertainty to a troubled market.

A U.S. congressional committee was expected to concede defeat in its bid to lower the deficit, renewing the debate over taxes and spending at a time when the impending expiration of payroll tax breaks and jobless benefits could help to undermine the economy.

The committee's co-chairs will issue a statement later Monday, according to sources, declaring the committee was unable to reach a deficit-reduction deal because of deep divides over taxes and spending.

There is now a lot of uncertainty over the prospects of extending the payroll tax cut or unemployment benefits. That's important because those have been serving as a stimulus for the economy, and losing them would create a drag, said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati.

In addition, Moody's said a recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for the country's credit rating.

The developments create further headwinds for an already volatile market, and could extend the previous week's losses.

In Europe, the FTSEurofirst 300 <.FTEU3> index fell 2.5 percent. In addition to the new concerns about France, Spanish prime minister-elect Mariano Rajoy was under pressure to details his policies to overcome a severe economic crisis after his center-right party won the country's biggest election victory in 30 years.

Europe's situation continues to fester, and it seems like things are getting more dire with the run-up we're seeing in their yields, said Sargen, who helps oversee $38 billion.

The Dow Jones industrial average <.DJI> slid 217.41 points, or 1.84 percent, at 11,578.75. The Standard & Poor's 500 Index <.SPX> was down 23.71 points, or 1.95 percent, at 1,191.94. The Nasdaq Composite Index <.IXIC> took off 53.22 points, or 2.07 percent, at 2,519.28.

Trading volume is expected to be light this week as markets are closed for the U.S. Thanksgiving holiday on Thursday. The light action could add to market volatility.

The S&P failed to rise above 1,225 on Friday after a drop below it on Thursday triggered massive selling, and that level is now strengthening as technical resistance. Last week, the Dow fell 2.9 percent, the S&P dropped 3.8 percent, and the Nasdaq lost 4 percent.

Pharmasset Inc surged 85 percent to $134.50 after Gilead Sciences Inc agreed to buy the company for $11 billion in cash. Gilead fell 11.6 percent to $35.33.

Also in merger news, Alleghany Corp will buy Transatlantic Holdings Inc for about $3.4 billion, sending Transatlantic shares up 0.7 percent to $54.82.

U.S. existing home sales unexpectedly rose in October as low interest rates for mortgages and rising rents encouraged more home buyers, a trade group said. Equities were little impacted by the data.

(Editing by Jeffrey Benkoe)