Investors bailed out of stocks and ran to the few “safe havens” left to them, as they responded to Standard & Poor’s decision to downgrade the United States’ credit rating with a massive sell off that had the Dow Jones industrial average finishing the day down 634.76 points.
The concern about the U.S. credit rating was amplified when Standard & Poor’s announced Monday morning that it was also downgrading the debt of mortgage giants Fannie Mae and Freddie Mac, which rely on U.S. government guarantees.
But traders said much of the pessimism Monday resulted from broader concerns about the economy. Worries about the U.S. economic recovery have been building since the government said that economic growth was far weaker in the first half of 2011 than economists expected.
Combined with Fridays US credit rating downgrade, and a lack of investor confidence, stocks ended up with their worst day since the financial crisis in the fall of 2008 and extended Wall Street’s sudden, sharp decline that have seen stocks lose 15 percent of their value in just two and a half weeks.
The Dow ended the day down 634.76 points, or 5.5%, to 10,809.85.
Last week, the Dow Jones industrial average fell almost 700 points. That was its biggest weekly point loss since 2008, during the financial crisis.
The broader Standard & Poor’s 500 index fell even more abruptly, finishing the day down 79.83 points, or 6.6%, to 1,119.55, its worst day since December 2008, with every stock in the benchmark index ending in negative territory.
The Nasdaq Composite Index plunged 174.72 points, or 6.90 percent, to close at 2,357.69.
The Vix, the measure of market volatility and fear among investors, shot up 50 percent, in its steepest rise since February 2007.
Gold set a record, up $61.40 an ounce to settle at $1,713.20.
Crude oil, natural gas and other commodities fell sharply on worries that a weaker global economy will mean less demand. Oil fell 6.4 percent to $81.31 per barrel, its lowest price of the year.
Stock markets worldwide also took a hit. The main stock index fell almost 4 percent in South Korea and more than 2 percent in Japan. European markets as well opened and fell, with Germany down 5 percent and France 4.7 percent.