US markets fall over budget failure

Stocks have plunged in the US after Congress' latest bid to resolve the federal budget gridlock appeared to fail.

The Dow Jones industrial average fell 312 points, or 2.7%. The Standard & Poor's 500 index was down 31, or 2.5%, at 1,185. The Nasdaq composite index was down 68, or 2.7%, at 2,504.

A 12-member bi-partisan panel was assigned to cut 1.2 trillion dollars from the federal deficit by Wednesday. The panel appeared ready to admit failure on Monday. That could lead to broad, automatic cuts from military and social spending.

Uncertainty about government spending drags on the economy because the private sector is growing so slowly. Traders also fear that Europe's debt crisis might spill over, disrupting the fragile US recovery.