NEW YORK — The stock market was not exactly surprised that a so-called supercommittee in Congress failed to reach a deal to cut the federal budget deficit. But since summer, many have sold at the first hint of trouble.
So Monday, they sold big. The Dow Jones industrial average lost almost 250 points on a day when investors despaired over debt problems at home and abroad.
Members of the special committee, created in August to come up with $1.2 trillion in deficit cuts over 10 years, indicated all day that there would be no deal. After the market closed, the committee’s bipartisan leadership made it official.
“They’re essentially giving up,” said Robert Robis, head of fixed-income macro strategies at ING Investment Management.
Meanwhile in Europe, Moody’s warned that France could face a downgrade because the debt crisis in Europe has pushed borrowing costs higher for the French government. For now, France has a rating of AAA, the best.
Stock indexes fell 3.4 percent in both Germany and France — bigger declines than in the United States. Germany and France are the two largest economies in Europe.
The supercommittee stalemate is supposed to trigger automatic spending cuts across the government, but there already were hints that Congress would find a way around them. Analysts say that could lead to another downgrade of the U.S. credit rating. In addition, the failure raises the question of how a gridlocked Congress will find a way to renew a cut in the Social Security tax or agree on whether to extend long-term unemployment benefits.
The Dow finished down 248.85 points, or 2.1 percent, at 11,547.31. At its low point of the day, the Dow was down 342.
The Standard & Poor’s 500 index dropped 22.67, or 1.9 percent, to 1,192.98. The S&P 500 fell 3.8 percent last week, its worst since September. The Nasdaq composite index declined 49.36, or 1.9 percent, to 2,523.14.
“People are getting so short-term oriented now that all they know is how to make day trades,” said Robert Pavlik, chief market strategist with Banyan Partners in New York.
The selling swung the Dow from a gain for the year to a loss, the first time that has happened in a month.
