By Gary Strauss, USA TODAY
U.S. stocks sank Monday, following plunges in Asia and Europe, as last week's downgrade of the USA's credit rating reverberated around the world.
By Koen Van Weel, AFP/Getty Images
Traders at ABN AMRO bank in Amsterdam watch global transactions on August 8, 2011.
President Obama's attempts to assauge skittish investors during a mid-afternoon televised speech appeared to accelerate the losses. Before speaking, The Dow was down about 385 points; following his remarks, the Dow was down 545 points, or 6%.
Earlier, Japan's Nikkei 225 index fell more than 2%, setting the stage for big selloffs in Europe. By the end of trading, Germany's Dax had dropped 5% on aggressive selling, while French stocks were down 4%. Most European exchanges settled at their lowest levels since August 2009.
By early afternoon in New York, The Nasdaq was off almost 160 points, or more than 6%. The Dow, trading at about 10,865, has lost more than 1,200 points the past week.
Monday's market losses were exacerbated by growing fears of further damage to the fragile global economy, already suffering from sagging consumer confidence and Europe's debt crisis.
Stock trend
Dow Jones industrial average, five trading days
On Monday, Standard & Poor's downgraded the credit ratings of mortgage lenders Fannie Mae, Freddie Mac, which back or own about half of U.S. home mortgages, plus agencies and banks that issued government-backed debt. Those downgrades could mean higher mortgage rates for U.S. borrowers.
Bank stocks were particularly hard hit. CitiGroup was off 10%, JPMorgan Chase slumped 6.4%. Bank of Americawas off 16% after American International Group said it would sue to recover $10 billion in losses on mortgage-backed securities.
Gold, considered a haven in troubled times, surged $70 to an all-time record $1,721 an ounce.
The carnage could likely continue, market strategists say.
"Recession and double dip theories are not just on the minds of Europeans, they are also on the minds of Americans,'' said Howard Wheeldon, senior strategist at BGC Partners.
Fresh memories of the financial crisis three years ago were driving investors away from risky investments and into what's considered safer.
"Fear of a repeat of 2008 is what's really driving investments," said Gary Schlossberg, senior economist with Wells Capital Management.
Prices for U.S. government debt rose — even after S&P essentially said they were a riskier investment than the debt of some other major world economies — because U.S. Treasury securities are still seen as one of the world's few safe havens. Prices rise and yields fall as demand increases.
The yield on the 10-year Treasury note fell much of the morning, to 2.35% from 2.57% late Friday. The 10-year note's yield fell as low as 2.06% in 2008.
Where Treasury prices finish the day will be important, Bill O'Donnell, head of U.S. Treasury strategy at RBS Securities, wrote in a report.
"We will learn more about the future path of Treasury prices at today's close than we will by the open," he said. "I want to see how the market clears and how it synthesizes the cacophony of news of late."
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.
Contributing: USA TODAY's Kathy Chu in Hong Kong; Associated Press
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