US Stocks spooked by European debt woes (ext)

NEW YORK (CNNMoney) -- U.S. stocks sank Monday as investors got spooked by worries that Europe's debt crisis could spread to Italy, one of Europe's largest economies.

The Dow Jones industrial average (INDU) sank 152 points, or 1.2%, to close at 12,505. The S&P 500 (SPX) fell 24 points, or 1.8%, to 1,319; and the Nasdaq Composite (COMP) fell 57 points, or 2%, to 2,803.

Stocks fell sharply in Europe on concerns about Italy's banking sector and the nation's debt load. European officials met Monday to discuss Greece and other debt-stricken members of the European Union.

The selloff spilled over into the U.S. market as traders worry that the fiscal problems facing troubled EU members such as Greece, Portugal and Ireland may be spreading to larger economies in the monetary union, including Italy and Spain.

"This is potentially a cascading crisis," said Bruce McCain, chief investment strategist at Key Private Bank.

The intensifying worries about a broader debt crisis in Europe sent investors flocking to assets that are seen as safer alternatives.

The U.S. dollar jumped 1.7% against the euro, and U.S. Treasury prices rose, with the 10-year yield back below 3%. Gold rallied to near record highs and oil prices dropped 1% to $95.15 a barrel.

In the United States, investors have been grappling with signs that the nation's economy is deteriorating, including a much weaker than expected report on the nation's job market last week.

Adding to the bearish tone, inflation and export data released by China over the weekend raised concerns that the world's second largest economy may be slowing, and that China may raise interest rates further to cool inflation.