Traders work on the floor of the New York Stock Exchange on Monday, Aug. 8, 2011 in New York.
NEW YORK -- Stock prices hurtled lower Monday as anxiety overtook investors on the first trading day since Standard & Poor's downgraded American debt. The Dow Jones industrials fell more than 600 points.
The Dow fell below 11,000 for the first time since November. The sharp drop extended Wall Street's almost uninterrupted decline since late July, when the Dow was flirting with 13,000.
Investors worried about the slowing U.S. economy, escalating debt problems threatening Europe and the prospect that fear in the markets would reinforce itself, as it did during the financial crisis in the fall of 2008.
They desperately looked for safe places to put their money and settled on U.S. government debt -- even though those were the targets of the downgrade Friday, when S&P removed the United States from its list of the lowest-risk countries.
The price of Treasurys rose, and yields, which move in the opposite direction from price, fell. The yield on the 10-year Treasury note fell to 2.33 percent from 2.57 percent Friday.
"This is largely a flight to safety," said Thomas Simons, money market economist with Jefferies & Co. "The bond market is really trading off of what's going on in the stock market." Gold set a new record, trading for more than $1,700 an ounce.
The Dow plunged 634 points, or 5.5 percent to 10,809. It was the first time the Dow fell below 11,000 since November and its biggest one-day point drop since December 2008 The S&P 500 slid 79 points, or 6.7 percent, to 1,119.46. The Nasdaq dropped 174.72, or 6.9 percent, to 2,357.69.
Stock markets in Asia began Monday's global rout. The main stock index fell almost 4 percent in South Korea and more than 2 percent in Japan. European markets opened later and fell, too, with Germany down 5 percent and France 4.7 percent.
In the U.S., stocks fell even though Moody's, another major credit rating agency, stood by its top rating of Aaa for the United States. Financial markets also did not appear comforted by an afternoon statement by President Barack Obama, who said Washington needs more "common sense and compromise" to tame its debt.
"Markets will rise and fall," he said. "But this is the United States of America. No matter what some agency may say, we've always been and always will be a triple-A country." S&P, in its downgrade, criticized dysfunction in the American political system. The downgrade wasn't a total surprise but came when investors were already feeling nervous about the U.S. economy and European debt, among other problems.
Last week, the Dow Jones industrial average fell almost 700 points. That was its biggest point loss since October 2008, during the financial crisis. Counting Monday, the Dow has dropped in 10 of the last 12 trading days.
Crude oil, natural gas and other commodities fell on worries that a weaker global economy will mean less demand. Oil fell $3.47 to $83.41 per barrel.
S&P on Monday downgraded mortgage lenders Fannie Mae, Freddie Mac and other agencies linked to long-term U.S. debt. Fannie and Freddie own or guarantee about half of all U.S. mortgages. Their downgrade could mean higher mortgage rates.
Worries about weaker profits that could result from a slowing economy have slammed the financial industry since late July. The Vix index, a measure of fear among investors, shot up 26 percent to its highest level since May 2010. The index shows how worried investors are that the S&P 500 will drop over the next 30 days. It does this by measuring prices for stock options that investors can buy to help protect their portfolios.
Investors are worried that Spain or Italy could become the next European country to be unable to pay its debt. The European Central Bank said it will buy Italian and Spanish bonds in hopes of helping the countries avert a possible default.
Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing nations issued a joint statement Monday saying they were committed to taking all necessary measures to support financial stability and growth.
"We will remain in close contact throughout the coming weeks and cooperate as appropriate, ready to take action to ensure financial stability and liquidity in financial markets," they said.
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.
The economy grew at a 1.3 percent annual rate from April through June, below economists' expectations. It expanded at just a 0.4 percent rate in the first quarter. The first half of 2011 was the slowest since the end of the recession.
Then reports showed that the manufacturing and services industries barely grew in July. Job growth was better than economists expected last month. But the 117,000 jobs created in July were still well below the 215,000 that employers added between February and April, on average.
The Federal Reserve will meet on Tuesday, but economists don't expect much to come out of the meeting. The central bank's key interest rate is already at a record of nearly zero, where it has been since 2008.
The Fed has also already said that it plans to keep rates low for "an extended period." Chairman Ben Bernanke said last month that the Fed could step in to help the economy if it further weakened.
Fears about a weaker U.S. economy have overshadowed profit growth that companies have reported for the second quarter. For the 441 companies in the S&P 500 that have already reported, earnings rose 12 percent in the second quarter from a year earlier. Revenue growth has also topped 10 percent for the first time in a year.