US Markets

U.S. stocks tumbled deeper into correction territory in a Monday rout that sent the Dow Jones Industrial Average plunging to the biggest point drop since Dec. 1, 2008. The Dow Jones Industrial Average plunged 634.76 points, or 5.55%, to 10809.85, falling beneath 11000 for the first time since November and adding to last week's steep losses. The blue-chip measure ended exactly on session lows, in a harried trading day that was the stock market's first since Standard & Poor's downgraded the federal government's credit rating late Friday.

[Kick off your trading day with our newsletter]

Major stock indexes cascaded lower throughout much of the session, as S&P added downgrades of clearing bodies, entities such as Fannie Mae and Freddie Mac and lowered outlooks for companies including Warren Buffett's Berkshire Hathaway, following the Friday U.S. credit rating cut to double-A-plus from triple-A. The Standard & Poor's 500 stock index tumbled 79.92 points, or 6.66%, to 1119.46. Financial and energy stocks fell the hardest. Not a single S&P 500 component ended in positive territory. The Nasdaq Composite slumped 174.72 points, or 6.9%, to 2357.69.

The Russell 2000 index of small-capitalization stocks was hit hardest, falling 63.67 points, or 8.91%, to 650.96. Small caps tend to make more exaggerated moves and are generally viewed as riskier than the widely held shares of large companies.

The fact that Monday's swoon came right on the heels of the Dow's biggest weekly point loss since the financial crisis in 2008 set up many market participants for forced sales and margin calls, traders said. That made some of the losses self perpetuating. It also raised the prospect of capitulation, the point when losses snowball and sentiment craters, helping markets find a bottom.

Bank of America plunged 20% to lead blue-chip decliners, stung by both a steep selloff in financial stocks and by word that American International Group Inc. is suing the company, along with a host of other prominent financial institutions, as it seeks to recover losses on mortgage-backed securities. AIG's stock fell 10%.

European Markets

European stock markets ended sharply lower Monday as the first-ever downgrade of the U.S. credit rating sapped confidence in most sectors and sent Germany's blue-chip index down 5%. The pan-European Stoxx 600 index dropped 4.1% to close at 228.98, bringing its monthly losses to nearly 14%, after Standard & Poor's late Friday cut its rating on the U.S. to AA-plus from AAA, and said the outlook was negative.

The German DAX 30 index, heavily weighted toward automotive and industrial stocks, performed the worst of the major indexes, tumbling 5% to close at 5,923.27. Car makers BMW AG and Daimler AG fell 8.8% and 7.1%, respectively. Steel maker ThyssenKrupp AG sank 9.6%.

Meanwhile, Russia's RTS stock index dropped 7.8% to 1,657.77, as falling oil prices hit the heavily represented energy sector. In Greece, the ASE Composite index tumbled 6% to 998.24, including a 5% drop for EFG Eurobank Ergasias SA. Monday's decline for the Stoxx 600 added to a 9.9% drop last week its worst since late November 2008.

The Stoxx 600 index had initially gained as much as 0.8% Monday morning as investors welcomed the European Central Bank's move to snap up sovereign bonds, which helped send yields on Spanish and Italian debt sharply lower. However, the gains for stocks were swiftly erased as worries over growth and the impact of the U.S. downgrade weighed heavily on cyclical stocks such as miners, technology firms and car makers.

In Europe, shares of PSA Peugeot Citroen slumped 9.1% in Paris after Morgan Stanley downgraded the stock two notches to underweight from overweight. Rival Renault SA fell 9.3%, helping pull the French CAC 40 index down 4.7% to close at 3,125.19. Spain's IBEX 35 index slipped 2.4% to 8,459.40, as shares of Banco Santander fell 1.2%.

Many banks, which had rallied sharply on the European Central Bank's buying swiftly lost ground, including ING Group, shares of which fell 8.3% in Amsterdam. In Italy, the FTSE MIB index dropped 2.4% to 15,639.75, with shares of Fiat Industrial SpA down 11%. In London, the FTSE 100 index fell 3.4% to settle at 5,068.95, including a 6.5% drop for mining giant Rio Tinto PLC.

Asian Markets

Asian stock markets ended sharply lower Monday as Standard & Poor's historic downgrade of U.S. government debt raised fresh concerns about the global economy and pushed investors to sell risky assets. China's Shanghai Composite Index, South Korea's Kospi and Taiwan's Taiex each fell 3.8% to finish at 2,526.82, 1,869.45 and 7,552.80, respectively.

Japan's Nikkei Stock Average closed down 2.2% at 9,097.56, while Hong Kong's Hang Seng Index shed 2.2% to finish at 20,490.57. India's Sensex fell 1.8% to close at 16,990.18. Monday's performance marks another day of heavy losses in Asia.

Last week, Taiwan's Taiex sank more than 9% and the Kospi lost 8.9%. Japanese shares had dropped more than 5% last week, while Hong Kong shares fell almost 7%. While the latest trigger for the tumble came from Standard & Poor's downgrade of U.S. debt to AA+ from AAA, worries that European sovereign-debt troubles were spreading have also grabbed investor attention for several weeks.

After losing ground Friday, banking, insurance and other financial stocks fell further during Monday's session, with HSBC Holdings PLC falling 1.5% and Bank of China Ltd. sliding 3.6% in Hong Kong. Sumitomo Mitsui Financial Group dropped 2.2% and Shinsei Bank fell 3.3% in Tokyo.

KB Financial Group skidded 7.5% in Seoul and Cathay Financial Holding slumped 6.9% in Taipei. With benchmark Nymex crude-oil futures trading around $84 a barrel, energy stocks lost ground, with JX Holdings down 2.7% in Tokyo and Cnooc down 4% in Hong Kong. PetroChina shed 3.1% in Hong Kong and in Shanghai.

Commodities

Base metal prices took a battering Monday, closing sharply lower across the board after Standard & Poor's downgrade of U.S. debt drove investors out of risky investments and into safe haven assets such as gold. Copper on the London Metal Exchange finished the session down 2.9%, at $8,780 a metric ton, while lead closed a massive 6.6% lower, at $2,204.5/ton. Nickel shed 5.6% to close at $21,245/ton, while tin fell 7.4% to $22,505/ton.

Oil futures fell to their lowest level in almost nine months Monday, as the Standard & Poor's downgrade of U.S. debt highlighted the weak economic health of the world's biggest oil consumer. Light, sweet crude for September delivery settled down $5.57, or 6.4%, at $81.31 a barrel on the New York Mercantile Exchange, its lowest finish since Nov. 23. Brent crude on the ICE futures exchange settled down $5.63, or 5.2%, at $103.74 a barrel.

Oil futures started the day sharply lower, then extended their losses as equities sold off throughout the day. S&P's decision to strip the U.S. of its triple-A rating had been expected, but many investors saw the move as confirmation that the U.S. economy is on a much weaker footing than previously expected. Gold soared to a record Monday as investors scrambled to shed riskier holdings in the wake of the U.S. credit downgrade.

The most actively traded contract, for December delivery, gained $61.40, or 3.7%, to settle at a record $1,713.20 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract set an intraday record of $1,723.40 a troy ounce after floor trading closed. Thinly traded August-delivery gold settled at a record $1,710.20 a troy ounce, $61.40, or 3.7% higher. It touched a record $1,720 a troy ounce after floor trading closed.