U.S. stocks skidded on Monday, extending losses from across Europe as fears over out-of-control government debt on both sides of the Atlantic hit financial markets.

Commodities also slumped as worries about a global recession and rising stockpiles of some raw materials pulled crude oil, gold and grains prices lower.

Shares on Wall Street hit a one-month low, with the S&P 500 index down nearly 2 percent as it closed below the 1,200-point level for the first time since October.

The Dow Jones industrial average and the tech-heavy Nasdaq also finished about 2 percent lower, following through on last week's declines as a congressional super committee was expected to concede defeat in its bid to reduce the U.S. deficit.

These days it's pretty hard to have confidence in the political side of things said Rick Bensignor, chief market strategist at Merlin Securities in New York.

Wall Street's fear gauge, the CBOE Volatility index VIX, rose nearly 3 percent.

There are more and more signals that we are heading into a global recession, said James Dailey, chief investment officer at TEAM Financial Managers in Harrisburg, Pennsylvania. This is not something the market was expecting, say a week ago.

Gold futures finished down 3 percent, below $1,680 an ounce. The precious metal, with record highs above $1,900 as recently as September, is on course to finish the year down 18 percent.

U.S. oil prices settled down nearly 1 percent at $96.92 per barrel, after falling 2 percent at one point.

Investors took refuge in safe havens, pushing yields on benchmark 10-year U.S. bonds down to 1.97 percent from 2.01 percent on Friday.

The dollar hit a six-week high versus a currency basket but then pared some of its gains after data showed U.S. existing home sales unexpectedly rose in October as low mortgage interest rates and rising rents led more homebuyers into the market.

Light trading volume, expected throughout the week due to Thursday's U.S. Thanksgiving holiday, could add to market volatility, traders said.

At the close, the Dow Jones industrial average was down 248.85 points, or 2.11 percent, at 11,547.31. The Standard & Poor's 500 Index was down 22.67 points, or 1.86 percent, at 1,192.98. The Nasdaq Composite Index was down 49.36 points, or 1.92 percent, at 2,523.14.

A takeover deal provided a bright spot on Wall Street as Pharmasset Inc surged 85 percent to above $134 after Gilead Sciences Inc agreed to buy the company for $11 billion in cash. Gilead tumbled 10 percent to around $35.

In Europe, stocks hit 6-week lows as Moody's warned about France's rating outlook and Spanish yields rose following election of a new government.

World stocks as measured by MSCI were down 2.3 percent for a 12 percent year-to-date loss. More volatile emerging market stocks lost 2.6 percent.

In Europe -- the heart of the debt storm -- the FTSEurofirst 300 index finished down 3.3 percent, putting it more than 17 percent lower for the year.

(Additional reporting by Chuck Mikolajczak, Jeremy Gaunt, Blaise Robinson and Kirsten Donovan; Editing by Dan Grebler)