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US stocks fall on expectations that panel will fail to agree on cutting federal deficit
NEW YORK (AP) ' Stocks are taking a sharp fall in early trading Monday amid reports that a congressional committee will fail to agree on a plan to cut the U.S. government's budget deficit. The Dow Jones industrial average is down more than 200 points.
A 12-member bipartisan panel is supposed to agree on at least $1.2 trillion in budget cuts by Wednesday. But the panel appeared ready to admit failure on Monday.
If the committee is unable to agree, it will trigger automatic spending cuts over 10 years starting in 2013. Analysts say that if Congress tries to dismantle those cuts it could lead to another downgrade of the U.S. credit rating.
The lack of an agreement also sets up a fight over renewing a payroll tax cut and extending unemployment insurance benefits. Both expire at the end of December.
The Dow Jones industrial average is down 207 points, or 1.7 percent, to 11,590 as of 10 a.m. Eastern time. The S&P 500 index is down 22, or 1.9 percent, to 1,192. The Nasdaq composite index is down 52, or 2 percent, to 2,520.
European markets also dropped. France's CAC 40 lost 2.6 percent, and Germany's DAX sank 2.7 percent. Ratings agency Moody's warned Monday that France's top credit rating remains under pressure as worries over Europe's debt crisis have pushed the government's borrowing costs higher. In weekly note, a Moody's Investors Service analyst said that if high borrowing costs persist it would have "negative credit implications" for France's triple-A credit rating.
Two deals were announced early Monday. Gilead Sciences Inc. plans to buy drug developer Pharmasset Inc. for $11 billion. Pharmasset has an experimental hepatitis C drug in late-stage clinical trials. In early trading, Gilead fell 11 percent in morning trading while Pharmasset soared 85 percent.
Property and casualty insurer Alleghany Corp. agreed to buy the reinsurance company Transatlantic Holdings Inc. in a $3.4 billion deal. Transatlantic rose 1 percent in morning trading while Alleghany fell almost 9 percent.
The S&P 500 lost 3.8 percent last week, its worst weekly drop since mid-September. The steepest falls came Wednesday and Thursday after Moody's warned that Europe's debt crisis could hit the largest U.S. banks. The S&P 500 is now down 5.2 percent for the year.