U.S. stocks are enduring a massive sell-off following decisions by ratings agency Standard & Poor’s to downgrade the long-term credit rating of the U.S. government by one notch to AA+.

The Dow Jones Industrial Average is down more than 423 points, or 3.7 percent; the S&P 500 has dropped more than 57 points, or 4.8 percent, while Nasdaq has shed almost 120 points, or 4.8 percent.

Among battered stocks, Bank of America Corp. (NYSE: BAC) has plunged almost 16 percent after it was learned that American International Group (NYSE: AIG) filed a lawsuit against the bank for allegedly selling it mortgage-backed securities at inflated prices.

AIG is seeking more than $10-billion in damages.

Some investors, who were already jittery about the European debt crisis, and continued bad news on the US economic front, appear to have thrown in the towel.

Meanwhile, Treasury yields have fallen and gold has surged to an all-time high above $1714 per ounce as investors flock to safe-haven assets.

The yield on the 10-year Treasury note has fallen to 2.37 percent from 2.57 percent late Friday.

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."

The U.S. is practically mirroring the equity declines witnessed overnight in Asia and concurrently in Europe.
In addition, the VIX index – a measure of investor fear – has spiked more than 22 percent to 39 – its highest level since May 2010.