NEW YORK, July 29 (Reuters) - Cotton futures settled lower Friday as the market swung from daily limit down to slightly firmer on the day in a reflection of the deep uncertainty gripping investors worried over the U.S. debt crisis, analysts said.
"Maybe there a lot of nervous 'Nellies' out there," Sharon Johnson, senior cotton analyst for commodities brokerage Penson Futures in Atlanta, Georgia, said in describing the market's overall mood.
"Is it going to be Armageddon (in world financial markets) on Monday?" A financial fiasco would hit cotton futures because it would severely weaken demand for the fiber in depression-hit global economies, analysts said.
The key December cotton futures on ICE Futures U.S. fell 0.80 cent to finish at $1.0177 per lb, trading from 98.57 cents to $1.028. On the month, the market is down around 14 percent.
But the market's weekly performance showed a 3 percent gain. Since hitting a session low of 93.20 cents on Tuesday, cotton shot up by over 12 percent to hit a Wednesday peak at $1.0444, its highest since gapping lower on July 14 and July 15.
Total market volume Friday hit around 11,200 lots at 2:53 p.m. EDT (1753 GMT), about 30 percent below the 30-day norm, Thomson Reuters preliminary data showed.
Traders said investors deflated fiber contracts in early business as they scampered away from cotton and other markets, spooked by the prospect the United States, the world's biggest economy, would run out of money to pay its debts on Aug. 2 unless the country raises its debt ceiling.
Light short-covering enabled cotton to recover but late investor sales knocked cotton back into negative territory by the close of trade, dealers said. Some month-end squaring of positions may have added to the pressure seen in cotton futures.
Volume traded Thursday thinned out to 9,080 lots, down from the previous session's 16,710 lots and Tuesday total of 20,136 lots, which is the highest since July 18, ICE Futures U.S. data showed.
Open interest in the cotton market stood at 144,441 lots as of July 28, the highest level since June 21, the exchange data added.
