Warning on European debt crisis sinks Wall Street

Stocks slumped Monday after the German government played down hopes that Europe's debt crisis would be resolved soon. Major indexes fell about 2 percent in afternoon trading.

Expectations that a solution to the crisis could be reached at a European summit in Brussels on Oct. 23 helped lift the S&P 500 index to its biggest gain in two years this past week. Germany's finance chief Wolfgang Schaeuble said Monday those expectations were too optimistic.

In addition, a batch of weak corporate earnings reports also pulled stocks lower. Gannett Co. Inc. plunged 8 percent, the most of any stock in the Standard & Poor's 500 index, after the newspaper publisher reported a drop in advertising. Wells Fargo sank 8 percent after posting results that fell short of analysts' expectations.

At the close the Dow Jones industrial average was down 247.5 points, or 2.1 percent, at 11,397. The Standard & Poor's 500 index was off 23.7, or 2 percent, at 1,200.9. The Nasdaq was down 53 points, or 2 percent, at 2614.9.

Stock markets around the world rallied last week after the leaders of France and Germany pledged to come up with a far-reaching solution to the region's debt crisis by the end of October. That pledge appeared to be pushed back by German officials Monday. Schaeuble said he expects European leaders to adopt a framework to tackle the crisis on Sunday. A spokesman for German Chancellor Angela Merkel said discussions on how to solve Europe's debt problems will likely last into the new year.

Concerns about a messy default by the Greek government have been the main cause behind many of the stock market's big swings lately. The fear is that a default would cause deep losses for the European banks that hold Greek bonds. That could freeze lending between banks and escalate into another financial crisis similar to the one that occurred in 2008 after the collapse of Lehman Brothers.