U.S. stocks extended losses on Monday, sending the S&P 500 down 2 percent, as a prominent banking analyst gave a bleak view on the bank sector and the collapse of a potential takeover of Sun Microsystems punctured recent enthusiasm about the technology sector.

Adding to the negative tone were comments from billionaire investor George Soros on Reuters Financial Television that the U.S. economy was in for a lasting slowdown and that it wouldn't recover in 2009. He also said the banking system as a whole is basically insolvent.

A 4 percent decline in oil price also weighed, with energy shares among the market's top drags. Exxon Mobil fell nearly 2 percent.

The Dow Jones industrial average <.DJI> was down 135.40 points, or 1.69 percent, at 7,882.19. The Standard & Poor's 500 Index <.SPX> was down 17.07 points, or 2.03 percent, at 825.43. The Nasdaq Composite Index <.IXIC> was down 35.27 points, or 2.17 percent, at 1,586.60.

(Reporting by Ellis Mnyandu; Editing by Leslie Adler)

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