NEW YORK: Fear and mass selling triggered after the US rating was downgraded from AAA continued across stock markets in the US and around the world. Despite US President Barack Obama claiming to the counter and promising better times, Dow Jones fell almost 500 points on Monday.
The Dow Jones Industrial Average plummeted 4.5 percent, going below the 11,000 level, as markets continued a global sell-off triggered by Standard & Poor's downgrade of the US credit rating.
The broader S&P 500 lost 5.7 percent, while the tech-heavy Nasdaq Composite plunged 5.6 percent.
US stocks dropped sharply on Monday, while Treasury bond prices actually rose in the wake of Standard & Poor's unprecedented downgrade of the United States's credit rating.
The Dow Jones Industrial Average plummeted 334.68 points (2.9 percent) to 11,109.93 at 1630 GMT.
The broader S&P 500 dropped 45.64 points (3.8 percent) to 1,153.74, while the tech-heavy Nasdaq Composite plunged 100.11 points (4.0 percent) to 2,432.30.
Standard & Poor's lowered the US long-term sovereign debt rating from AAA to AA+ after markets closed Friday, citing Washington's inability to rein in its mounting deficits.
The sell-off accelerated on Monday morning after Standard & Poor's extended its downgrade to mortgage giants Fannie Mae and Freddie Mac, whose bonds are guaranteed by the US government and widely held around the world.
Traders had worried that the downgrade would hit the bond markets as well, but instead US Treasury prices climbed.
The yield on the 10-year Treasury fell to 2.38 percent from 2.56 percent late Friday, while 30-year bonds dropped to 3.71 percent from 3.82 percent. Bond prices and yields move in opposite directions.
Gold, seen as a safe-haven asset in time of financial turmoil, was trading for $1,709.68 per troy ounce on the spot market in New York, after earlier hitting a new intraday high of $1,715.75.
"Sentiment is being rattled by late-Friday's downgrade of the US credit rating by Standard & Poor's and potential ripple effect in the financial industry," the Charles Schwab brokerage said in a research note.
Citigroup fell 9.6 percent, Goldman Sachs slid 5.8 percent and JPMorgan Chase shed 5.8 percent.
Bank of America plunged an eye-popping 15.9 percent after it was hit with a $10.5 billion fraud lawsuit from insurance group AIG over its practices in selling mortgage-backed securities before the 2008 financial crisis.
Basic materials and energy companies were badly hit as the global economic turmoil threatened to erode commodities prices, with aluminum giant Alcoa dropping 6.8 percent and oil major ExxonMobil falling 3.0 percent.
Global markets fall on fears of uncertainty
World markets, already reeling from fears of spreading eurozone debt contagion, were battered in the wake of the downgrade.
London closed 3.4 percent lower, while Paris was down 4.7 percent and Frankfurt slumped 5 percent.
The historic decision by Standard & Poor's to downgrade the United States's credit rating, which S&P had set at AAA in 1941, had been widely expected but nonetheless compounded worries about the global economy.
Even before the downgrade, stock markets had plunged last week on concerns that growth in the United States was slowing and the world's largest economy might be on the brink of a double-dip recession.
Financial markets are also on edge over concerns that Italy and Spain could fall victim to the eurozone debt crisis, which has already snared Greece, Ireland and Portugal.
With anxiety high that eurozone and US debt could plunge the world into a new financial crisis, the European Central Bank signaled late Sunday that it would make major purchases of eurozone government bonds, which market sources indicated on Monday had included Italy and Spain.
"The ultimate driver is uncertainty," said Patrick O'Hare, an analyst with Briefing.com.
"Say what one will about the S&P downgrade, the emergency meetings in Europe, the finger-pointing in Washington, and the rebuke from China ... it all adds up to more uncertainty," he said.
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@Anonymous: Israel has the backing of financial wealth of handful of people. They fleeced the US people. Now they are siding with the Israel, which will be the new whipping boy after third world war. Saudia Arab was created by Britishers to end Khilafat, they will join all the imperial pawns toward the bins of history after they swerved their purpose.
@guest-worker: It is the new upcoming ruling state. Wait till all currencies go down where all fiats go.
Israel shekel seems to be the only safe currency. If their PM can point fingers at Obama; he must be quite immune to economic shock
i remember baqir zaidi now.