Following on from a dismal showing in European and Asian markets, the broader United States market as measured by the Standard Poor’s 500-stock index was down 31.33 points, or 2.61 percent. The Dow Jones industrial average was down 230.8 points, or 2.02 percent, and the Nasdaq was down 69.06 points, or 2.73 percent.
Within the first two hours of trading, the S.P. 500 was down about 14 percent over the last 11 sessions, one analyst noted, bringing back echoes of the last financial crisis. Last week represented the worst five-day trading period since November 2008.
“The rapidity of the decline and its force now rivals almost anything we’ve seen in the post-war era,” said Dan Greenhaus, the chief global strategist for BTIG. “We have fallen so far and so quickly that we are up there with the most vicious sell-offs.”
The decision late Friday by the ratings agency Standard Poor’s to downgrade the United States’s debt rating one level to AA+ from AAA has global implications, said Alessandro Giansanti, a credit market strategist at ING in Amsterdam.
“We can see that this may force the U.S. to move more aggressively to cut spending,” he said, something that could drive the already weak economy into recession and weigh on the economies of all of its trading partners. “That’s the main driver” of the stock market declines, he said.
The market took a sharper turn downward less than an hour into New York trading, as Standard Poor’s, the ratings agency, announced additional downgrades, including the debt of the housing giants Fannie Mae and Freddie Mac.
Gold topped $1,700 for the first time, and the dollar continued to weaken against most major currencies. The Treasury’s benchmark 10-year note yield was down to 2.37 percent from 2.56 percent on Friday.
Guy LeBas, chief fixed-income strategist for Janney Montgomery Scott, said higher prices for bonds were “a testament to the fact that global investors view U.S. bonds as the safe-haven asset choice.”
While the debt downgrade was likely to continue to reverberate, investors are also concerned about the weak United States economy and Europe’s debt problems.
Some investors are turning their attention to a meeting of the Federal Reserve this week and whether there will be any new measures to stimulate the economy.
Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company, said the Federal Open Markets Committee was not likely to take action on interest rates, but would most likely discuss what policies would give support to the market.
“The rest of the conversations should happen in Washington,” Mr. Giddis said in a research note. “This country has an economic problem, which can only be fixed with jobs, not governmental liquidity, and that is the one that worries me the most.”
The interest rates on Spanish and Italian bonds plummeted after the European Central Bank expanded its purchases of government debt to support those countries for the first time. The yield on 10-year Spanish bonds dropped by 88 basis points, while comparable Italian yields fell 80 basis points. News agencies cited traders as saying the E.C.B. was intervening in the secondary market to buy the securities.
The E.C.B. declined to comment Monday. But in a statement issued late Sunday after an emergency conference call, the central bank said it would “actively implement” its bond-buying program to address “dysfunctional market segments.” It did not specify which bonds it would buy, but hinted it would be Spain and Italy by welcoming their efforts to restructure their economies and cut spending.
Previously the bond buying had been limited to bonds from Greece, Portugal and Ireland — the three euro-zone countries that have already received international bailouts. Fears that the bloc’s sovereign debt crisis would spread to the much bigger economies of Italy and Spain had contributed greatly to recent market losses.
Christine Hauser reported from New York and David Jolly from Paris. Bettina Wassener contributed reporting from Hong Kong, Jack Ewing from Frankfurt and Hiroko Tabuchi from Tokyo.
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