Stock Futures Pummeled as Focus Shifts to Washington

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The growing probability that U.S. lawmakers will fail to reach an agreement to tackle the country's debt burden as a key deadline looms sent stock futures tumbling following Wall Street's worst week in nearly two months.

Today's Markets

As of 8:40 a.m. ET, Dow Jones Industrial Average futures slid 136 points to 11,631, S&P 500 futures fell 15.8 points to 1,198 and Nasdaq 100 futures dropped 19.3 points to 2,231.

After weeks of headlines on Europe's debt debacle driving global equity markets, Wall Street's attention has once again shifted to Washington.

A congressional Super Committee tasked with crafting a bi-partisan solution to tackle the nation's mounting debt burden appeared stuck at a stalemate with the deadline looming just days away. The 12-member panel was mandated to craft the legislation as part a last-minute agreement over the summer to raise the nation's debt ceiling, staving off what could have been a costly default of American debt.

A failure of the committee to enact the legislation will trigger $1.2 trillion in Federal spending cuts that mostly take effect in 2013.  Economists say these cuts may be a substantial drag on the world's biggest economy starting in that year, but the more immediate concern may be to already jittery global financial markets that fear the political gridlock will prompt another downgrade of American debt.  Standard & Poor's cut the country's top-notch rating over the summer, sparking a powerful, global rout.

Analysts at Nomura warned clients in a note on Monday that the markets' reaction this time around may be "difficult to predict," noting that a "complete failure" may not be priced in, an indication that markets across the world could be in for more selling if the effort totally collapses.

Wall Street posted its worst weekly performance in nearly two months last week, with the Dow shedding close to 3%, and the broader S&P 500 and Nasdaq tumbling nearly 4%.

Market participants were also grappling with continued uncertainty on Europe's debt crisis.  Moody's warned on Monday that climbing debt yields and a dimming economic picture could be negative for its outlook on French debt.  France is the euro zone's second-biggest economy and one of the currency bloc's six triple-A rated nations.

The European Council is also set to unveil a proposal for so-called euro bonds, which would be joint euro zone debt issuance, according to a report by The Wall Street Journal.  Germany, the bloc's economic powerhouse, has repeatedly rebuked such plans that are highly unpopular from a political perspective in that country.  The EC's plan is yet another sign that Europe is struggling to contain its crisis that started in its debt-laden periphery from striking at its core.

European blue chips plummeted 2.7%, while the euro slid 0.43% to $1.345. Meanwhile, yields on U.S. Treasuries slid lower as trader piled into the perceived safe-haven asset.  The benchmark 10-year note yields 1.962% from 2.012%.

The U.S. economic calendar is fairly light on Monday, with a report on existing home sales forecast to show a 2.2% drop in October from the month prior.  The housing industry has been hit hard by a high supply of houses on the market, stubbornly-low prices and still-tight lending conditions.

Energy markets were mixed on Monday following a tumultuous week.  The benchmark crude oil contract traded in New York slid $1.33, or 1.3%, to $96.35 a barrel.  Wholesale RBOB gasoline gained 2 cents, or 0.77%, to $2.50 a gallon.

In metals, gold dropped $20.50, or 1.2%, to $1,704 a troy ounce.

Corporate News

Gilead Sciences (NASDAQ:GILD) revealed plans to acquire Pharmasset (NASDAQ:VRUS) in a deal valued at $10.4 billion.  Gilead's $137 a share offer represents an 89% premium to the viral-drug maker's closing price on Friday.

Alleghany (NYSE:Y) is buying Transatlantic Holdings (NYSE:TRH) for $3.4 billion in cash and stock.

Foreign Markets

European blue chips plummeted 2.7%, the English FTSE 100 fell 2.2% to 5,250, and the German DAX slid 2.7% to 5,646.

In Asia, the Japanese Nikkei 225 dipped 0.32% to 8,348 and the Chinese Hang Seng slid 1.4% to 18,226.