U.S. stocks slide sharply

By Herbert Lash

NEW YORK (Reuters) - U.S. stocks fell sharply on Monday as persistent credit and global growth concerns pulled equities down and led investors into safe-haven investments like bonds.

The declining price of U.S. equities reduced demand for the dollars to buy them and pushed investors into investments perceived as less risky, such as the yen and government debt.

Pressuring the financial sector was a steep drop in shares of American International Group Inc (AIG.N), which skidded to a 13-year low after Credit Suisse cut its price target and forecast a huge loss, mainly due to higher derivatives losses. AIG fell more than 5 percent to $18.78.

Lehman Brothers LEH.N also contributed to the negative tone, falling nearly 7 percent after a top South Korean regulator expressed concern about state-run Korea Development Bank's interest in buying a global bank. Talk of a white knight buyout of the mortgage-hit bank boosted shares last week.

The Dow Jones industrial average .DJI fell 241.81 points, or 2.08 percent, at 11,386.25. The Standard & Poor's 500 Index .SPX slipped 25.36 points, or 1.96 percent, at 1,266.84. The Nasdaq Composite Index .IXIC shed 49.12 points, or 2.03 percent, at 2,365.59.

Crude prices edged higher in thin, seesaw trade as Tropical Storm Gustav formed in the Caribbean, stirring concerns that it could disrupt the high concentration of U.S. oil and natural gas production that comes from the Gulf of Mexico.

Investors flocking to government debt pushed benchmark yields on U.S. Treasuries to 3-month lows while bund futures in Europe posted their biggest one-day rise in a month. Bond prices and yields move inversely to each other.

The dollar dropped against the yen, pressured by sharp losses in the U.S. stocks the nagging credit worries prompted investors to pare risky trades. But it gained versus the euro.