NYU economics professor and chairman of RGE Nouriel Roubini said today that 600 on the S&P was a possibility. The index would need to fall about 12% from Friday's close to reach that level.

Roubini, who predicted the financial crisis in 2006, is assuming that companies in the S&P will report about a $50 per-share profit and that traders will move the 12 P/E/ ratio to around 12.

“My main scenario is that it’s highly likely it goes to 600 or below,” Roubini said today in an interview at the Chicago Board Options Exchange Risk Management Conference. A level of “500 is less likely, but there is some possibility you get there,” he said.

Stocks still face “severe” risks and may extend declines amid plunging corporate earnings, an accelerating contraction of the global economy and a dimming outlook for banks, he said. The global economy is likely to shrink for the first time since World War II and trade will decline by the most in 80 years, the World Bank said yesterday.

“This onslaught of worse-than-expected macro news is going to have a negative effect on stock markets,” he said in his speech. “In the next few months many people are going to realize that many financial institutions are insolvent.”

Roubini told CNBC that growth is going to be close to zero and unemployment rate well above 10% into next year, before adding that most of the U.S. financial institutions are entirely insolvent.

Roubini repeated his assertion total losses could peak at $3.6 trillion in the financial system, with half of that being borne by banks and bank dealers and the other half borne by hedge funds and pension funds, among others.

Roubini says that the housing market, like a company restructuring in bankruptcy, needs to have face value reduction of the debt. Rather than go through mortgages one by one, he says reduction has to be across the board...break every mortgage contract.

He also took issue with the $800 billion stimulus package, saying it's not enough. For one thing, there's only $200 billion upfront, and half of that is a tax cut, which Roubini calls a waste of money that is not going to make a difference.

Finally, while he says there will be a light at the end of the tunnel, it'll probably get worse before it gets better. Those who believe in a second half recovery this year are delusional he says.

At Monday's close of floor trading on the NYSE, the DOW was on 6547.05 with a loss of 79.89 points (-1.21%) while the S&P finished on 678.53, down 6.85 points (-1.00%). The technology-heavy NASDAQ closed on 1268.64 after falling 25.21 points (-1.95%).

The dollar traded higher across the board as stocks declined, finishing the session with gains of 0.40% on the euro, 0.54% against the yen, 2.51% against cable and 1.42% on Australia's currency.

Treasuries declined again on Monday ahead of auctions scheduled for later this week, with yield on the 2-year note gaining 2.0 basis points to 0.959% while yield on the 10-year note rose 0.3 basis points to 2.880%.

Crude for March delivery was recently trading up $1.68 (3.69%) to $47.20 per barrel.

Gold for April delivery was recently trading down $20.10 (-2.13%) to $919.20 per ounce.