Stocks tumble on U.S. Europe debt worries

The Dow Jones industrial average lost almost 250 points Mondayas investors despaired over debt problems at home and abroad.

Members of the congressional special committee, created in August to come up with $1.2 trillion in deficit cuts over 10 years, indicated all day 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.

The supercommittee stalemate is supposed to trigger automatic spending cuts across the government, but there were already hints that Congress would find a way around them. Analysts say that could lead to another downgrade of the U.S. credit rating.

The result was another day of heavy selling in a market that has grown used to big swings. The Dow finished down 248.85 points, or 2.11 percent, at 11,547.31. At its low point of the day, the Dow was down 342. The selling swung the Dow from a gain for the year to a loss, the first time that has happened in a month.

In Europe, Moody's, a prominent ratings agency, warned that France could face a downgrade because the region's debt crisis has pushed borrowing costs higher for the French government. For now, France has a rating of AAA, the best.

One European country after another has fallen into crisis because of debt. Wary of the ability of countries to pay back their loans, bond investors have insisted on higher returns on national bonds, pushing borrowing costs to dangerous levels.

Investors still see American debt as safe, despite the failure of the supercommittee. Yesterday the yield on the benchmark 10-year Treasury note fell to 1.97 percent. It traded at 2.01 percent late Friday. Bond yields move down when bond prices go up. The higher demand for U.S. bonds yesterday was a sign that investors believe in their safety.

U.S. stock declines were broad. Energy and technology stocks lost the most. All 30 stocks in the Dow average fell.