The stock market was not exactly surprised that the so-called supercommittee failed to reach a deal to cut the federal deficit. But since summer, investors have bought at the first sign of hope and sold at the first hint of trouble.
So on Monday, they sold big.
The Dow Jones industrial average was down as much as 342 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.