Stocks sink as debt ceiling standoff, global threats spook Wall Street

Stocks closed with losses Monday as wide-ranging concerns about the sturdiness of the economy drove a broad selloff on Wall Street.

The Dow Jones Industrial Average closed with a loss of 593 points Monday, falling 1.7 percent on the after being down as much as 900 points earlier. The Nasdaq composite closed with a loss of 2.2 percent and the S&P 500 index closed with a loss of 1.7 percent, each also recovering ground before the closing bell.

"Investors have been itching for a meaningful pullback in the stock market. Now, we might finally be getting one," wrote Lindsey Bell, chief investment strategist for Ally Invest.

Investors and analysts attributed Monday's selloff to a whirlwind of concerns weighing on the global economy, including the potential economic impact of the delta variant and how it could affect the Federal Reserve's plans to taper stimulus. A deepening standoff between Democrats and Republicans over funding the federal government and raising the debt ceiling also loomed over the market.

Congress must take action to prevent government shutdown by Sept. 30 and may have less than a month to keep the U.S. from its first ever default on the national debt. While a brief government shutdown may cause little harm, a default could have potentially catastrophic consequences for the U.S. economy and financial system.

Speaker Nancy Pelosi (Calif.) and Senate Majority Leader Charles Schumer (D-N.Y.) said Monday that Democrats package a continuing resolution with a debt ceiling hike to avert a dual crisis, daring Republicans to block the measure in the Senate.

"The American people expect our Republican colleagues to live up to their responsibilities and make good on the debts they proudly helped incur in the December 2020 '908' COVID package that helped American families and small businesses reeling from the COVID crisis," Pelosi and Schumer said, referring to the $908 billion coronavirus relief bill signed by former President Trump last year.

But Senate Minority Leader Mitch McConnell (R-Ky.) insisted that his conference was firm in their opposition to raising the debt ceiling despite doing so several times under Trump.

"Democrats do not need out help," McConnell said in a speech Monday on the Senate floor, insisting that Democrats should raise the debt ceiling through budget reconciliation, which only requires a simple majority of votes in each chamber.

The rolling collapse of Chinese real estate giant Evergrande, which investors fear could cause a broader credit crunch in China, also loomed over the market.

"Much of investing is about sorting through what's signal and what's noise. While there is concern about the Evergrande situation infecting global markets, for the long-term investor, this situation may just be noise. Stories like Evergrande's can be tough to digest, and it may take time to understand the true risk related to this type of event," Bell wrote.

September is also a historically bad month for Wall Street, as investors tend to pull back as the fiscal year winds to a close.

"Following sell offs on Friday and this morning, the question now is will this become a prolonged number of sell off days or will this signal a buying opportunity," said JJ Kinahan, chief market strategist at TD Ameritrade.

Updated at 4:13 p.m.