Traders and bankers are braced for another volatile week in global markets — and the wildest ride is likely to be in stocks, not the Treasury bonds that were downgraded by Standard Poor’s on Friday.

The initial shock waves from the downgrade of the government’s credit rating were felt in stock markets over the weekend. Shares plunged in the Middle East on Sunday and were expected to open sharply lower in Asia.

On Wall Street, traders and strategists trekked to their offices on Sunday in scenes reminiscent of the fateful weekend before Lehman Brothers collapsed in 2008. Bank of America Merrill Lynch, Barclays, Credit Suisse and Morgan Stanley all hosted conference calls for anxious investors, and traders plotted strategy for what they expected to be a tumultuous day on Monday.

In Israel, shares fell 7 percent on Sunday, the worst drop since 2000. Investors placed so many sell orders that the Tel Aviv Stock Exchange delayed the opening of trading.

In early trading on Monday, Japanese and Australian stocks fell more than 1 percent. Gold prices were soaring, with spot prices approaching $1,700 an ounce, and the dollar weakened in early trading. In futures trading on Sunday night, major United States stock indexes were down more than 2 percent, although futures are not always reliable indicators of how stocks will open the next day in New York.

One factor that might bolster stocks is the announcement by European leaders on Sunday that they were planning huge purchases of Italian and Spanish bonds in an attempt to reassure nervous investors.

S. P. — the rating agency that issued a historic downgrade of United States Treasury securities to AA+ from AAA on Friday night — is expected this week to downgrade a host of other securities linked to Treasuries. Those include bonds from insurers as well as debt from Fannie Mae and Freddie Mac, the government-controlled mortgage giants.

Like Treasuries, notes issued by Fannie and Freddie are considered to be among the safest investments, so even a modest downgrade could rattle investors.

“What they did on Friday is a big deal,” said Peter Fisher, the head of fixed-income portfolio management at BlackRock, the giant asset manager. “We’re all waiting to see how they follow through in terms of the knock-on effect.”

At the Newport Beach, Calif., headquarters of Pimco, the world’s largest bond fund manager, the co-chief investment officer, William H. Gross, met with senior money managers and traders as Asian markets prepared to open, and also gathered a skeleton crew of employees to staff the trading desks.

It was the first Sunday that he had gathered his team at the office since Lehman’s collapse in September 2008, Mr. Gross said, adding that he was planning to be back at work at 3:30 Pacific time on Monday morning to gauge the market action in Europe.

“It’s a series of events that comes close to Lehman in terms of the anticipation, and the sleeplessness is similar,” Mr. Gross said. While he said he did not expect stocks or bonds to necessarily plunge this time, volatility reminiscent of the days of the financial crisis might be in store.

Mr. Gross said he expected that investors in only about 1 percent of his firm’s accounts would sell Treasury securities.

At the Manhattan offices of BlackRock, which has $3.6 trillion under management, Mr. Fisher was also at his desk Sunday. He said he did not expect that investors would automatically sell Treasury bonds as a result of the downgrade, but that they might unload riskier assets like stocks and lower-rated bonds.

“If you think the world is a risky place, you start at the outer edges, not what’s least risky,” Mr. Fisher said.

On both sides of the Atlantic, the twin worries of staggering amounts of government debt and slowing economic growth dominated the broader discussion, prompting European leaders to announce the purchases of Italian and Spanish bonds.

For American investors, the downgrade by S. P. comes at an especially jittery moment.

By the time the rating agency acted late Friday, Wall Street had suffered its worst week since the financial crisis, with the Dow Jones industrial average falling 5.75 percent, a slide punctuated by a 512-point drop on Thursday.

Even more than the standoff over raising the federal debt ceiling, the stock market’s plunge was caused by increasing fears that the economy has lost its momentum and could even be on the verge of another recession.

Those worries, compounded by the downgrade, could add up to a one-two punch for stocks.

“Investors who are still on the fence may begin to think a recession is more likely,” said Sam Stovall, chief investment strategist at S. P. Equity Research, which operates independently of S. P.’s ratings division. “There are a lot of things investors now have to contend with. They have to decide whether the global economy has stepped on a soft patch or on quicksand.”

To be sure, not everyone on Wall Street was calling for doom and gloom. In a note on Sunday, Barry Knapp, a strategist at Barclays Capital, said his firm remained bullish. Stock valuations, he insisted, remain appealing.

Still, in a sign of the anxiety coursing through Wall Street all weekend, nearly 4,000 investors dialed into a conference call organized by Morgan Stanley’s research team. “That’s the most I’ve ever heard of for a Sunday in August,” said Adam Parker, the firm’s chief United States equity strategist.

Echoing Mr. Fisher’s statements, Mr. Parker said that the Morgan Stanley team did not expect Treasuries to take a hit as a result of the downgrade.

But, as fear rises, riskier assets like stocks are likely to suffer, he said. He is recommending that investors avoid the consumer discretionary sector, which means companies like restaurants, retailers and apparel sellers, as well as industrial companies. A safer harbor might be health care companies and utilities.

“With the market having come down this fast, that in and of itself could increase the probability of a recession,” Mr. Parker said.

Bettina Wassener contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=3fbe0a497fa90c21ec31bb2c9a6bb855