NEW YORK (AP) -- The stock market was not exactly surprised that the so-called supercommittee failed to reach a deal to cut the deficit. But since summer, investors have sold at the first hint of trouble.
So on Monday, they sold big.
The Dow Jones industrial average lost almost 250 points after the special committee of Congress assigned to come up with $1.2 trillion in deficit cuts over 10 years indicated that there would be no deal.
"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.
In addition, the failure raises the question of how a gridlocked Congress would find a way to extend a cut in the Social Security tax. Congress passed it for one year, and some lawmakers support extending it because economic growth remains weak.
Each of those measures puts cash in the pockets of Americans, who can spend it and help the economy grow. Read More
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.
In addition, the failure raises the question of how a gridlocked Congress would find a way to extend a cut in the Social Security tax. Congress passed it for one year, and some lawmakers support extending it because economic growth remains weak.
Each of those measures puts cash in the pockets of Americans, who can spend it and help the economy grow. Read More
