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, gold and grains prices lower.

Shares on Wall Street hit a month-low, with the S&P 500 index down 2.3 percent as it dropped below the 1,200-point level for the first time since October.

The tech-heavy Nasdaq index was also down about 2.3 percent while the Dow lost 2.5 percent, following through on last week's declines as a congressional super committee was expected to concede defeat in its bid to lower 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. If you just don't have enough buyers stepping in then it doesn't take a lot of sellers to make market move down.

U.S. oil prices fell back to below $96 barrel, down 2 percent after initially paring some losses.

Gold futures lost nearly 3 percent, trading at around $1,675 an ounce. The precious metal, with record highs above $1,900 just in September, is on course to finish the year down 17 percent.

Investors took refuge in safe-havens, pushing yields on benchmark 10-year U.S. bonds down to 1.96 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 1:15 p.m. EST (1815 GMT), the Dow Jones industrial average fell 288.59 points, or 2.45 percent, at 11,507.57. The Standard & Poor's 500 Index lost 26.03 points, or 2.14 percent, at 1,189.62. The Nasdaq Composite Index fell 55.25 points, or 2.15 percent, to 2,517.25.

Merger activity provided a bright spot as Pharmasset Inc surged 84 percent to above $134 after Gilead Sciences Inc agreed to buy the company for $11 billion in cash. Gilead slumped 11 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 2.5 percent for a 12 percent year-to-date loss. More volatile emerging market stocks lost 2.8 percent.

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