Worries over debt in both the U.S. and Europe overcame Wall Street on Monday, sending stocks into a tailspin as investors flocked for the exits ahead of the Thanksgiving holiday.
Though considerably off the worst levels of the day, the selloff was still good enough to take 2 percent off the Dow industrials and nearly as much from the Standard & Poor's 500 and the Nasdaq.
Financials and industrials were the big losers of the day, with traders worried that mandated spending cuts that come with the failure of the congressional debt supercommittee to reach a deal will eradicate the nascent economic recovery.
The 12-member supercommittee tasked with cutting $1.2 trillion from the $15 trillion national debt stumbled towards its Wednesday deadline, with leaders on both sides of the aisle expressing pessimism that Monday would bring a deal. Today is essentially the deadline for a proposal, which would need 48 hours of congressional review before a vote.
"The initial reaction of global financial markets to this weekend's news of a deadlock suggests that the prospect of complete failure was not priced in," David Resler, chief economist at Nomura Securities, said in a note.
Each of the Standard & Poor's 500 10 sectors fell by more than 1 percent, with utilities and telecomm the least damaged. Late-day bargain hunters came in to temper some of the losses, but Wall Street was awash in red numbers.
Economic bellwether Caterpillar along with Hewlett-Packard, which reports earnings after the closing bell, led losers on the Dow industrials. The bluechip index again turned negative for the year.
The Nasdaq tech barometer declined as online retail giant Amazon fell as much as 5 percent while Intel lost nearly 3 percent.
There was more bad news form techland as well — Research in Motion shares tumbled after Credit Suisse slashed its price target for the Blackberry maker from $30 to $20.
The market took little solace from the day's only major piece of economic news — a reading that saw existing home sales rise 1.4 percent, better than expectations.
Treasury yields plunged, with the benchmark 10-year note falling to 1.97 percent. of global currencies, and sending the euro down to 1.347 against the American currency.
Though the market had plenty of warning that a supercommittee stalemate was possible, it was still caught off guard.