Stocks Sink on Rising Debt Worries

U.S. stocks closed sharply lower Monday,as investors worried that Europe’s debt crisis could spread to Italy and amid ongoing worries over the U.S. budget.  The Dow Jones Industrial Average lost 151.44 points, or 1.2%, to close at 12,505.76. The S&P 500 fell 24.31 points, or 1.8%, to 1,319.49. The Nasdaq Composite fell 57.19 points, or 2%, to 2,802.62.

Italy, Europe’s third-largest economy, and Spain, its fourth-largest, could be sliding toward default. Top officials of the European Council, the European Central Bank and the European Commission will hold an emergency meeting Monday to discuss the possibility that the debt crisis could spread to Italy from Greece, according to a media report Sunday.

President Barack Obama on Monday increased pressure on Republican lawmakers to make concessions for a deal to avoid an August 2 debt default and said both sides must “pull off the Band-aid” and make sacrifices.

Oil prices fell on Monday. Benchmark West Texas Intermediate crude fell $1.05 to settle at $95.15 per barrel Monday on the New York MercantileExchange.

Alcoa Inc posted a big jump in second-quarter profit on Monday partly due to soaring prices for aluminum and its raw material alumina. Net earnings were $322 million, or 28 cents per share, compared with $136 million, or 13 cents per share in the same quarter of 2010. Income from continuing operations, excluding one-time items, was 32 cents a share. Revenue rose 27 percent to $6.66 billion, helped by rising prices for aluminum.

Networking gear maker Cisco Systems Inc. may cut about 5,000 jobs in August in one of its largest work force reductions, Gleacher & Co. analyst BrianMarshall said on Monday.