Investors threw in the towel en masse Monday as the U.S. stock market suffered historic losses after Standard & Poor’s took the unprecedented step late Friday of downgrading the U.S. government's long-term credit rating.
Not even some reassuring words from President Obama could halt the relentless sell-off
"Markets will rise and fall," Obama 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."
Meanwhile, amidst the slaughter in equities, Treasuries rallied and gold soared to a new all-time high.
The Dow Jones Industrial Average plunged 633.85 points, or 5.54 percent, to 10,810.76; the S&P 500 index tumbled 79.92 points, or 6.66 percent, to 1,119.46; while the tech-heavy Nasdaq lost 174.72 points, or 6.90 percent.
On an absolute points-basis, it was the Dow's worst day since Oct. 9, 2008, when it fell 679 points, soon after the collapse of Lehman Brothers.
No sector endured less than a five percent drop, with energy (7.6 percent) and capital goods (7.6 percent) incurring the highest losses Monday.
Moreover, the Dow closed at its low for the day, suggesting more bearish moves for Tuesday. In fact, the Dow slid below the 11,000 level for the first time since last November.
Since July 1, the Dow has fallen by more than 14 percent.
The S&P 500 index has tumbled 17.9 percent since its April 29 high of 1363.61. Should it fall further to the 1090.89 level, it will have dropped the requisite 20 percent for a true bear market.
Ten-Year Treasury yields dropped to 2.34 percent from 2.57 percent late Friday, suggesting that even “downgraded” US government bonds remain the safest investment.
The price of oil – a proxy for future economic growth – plunged 7.42 percent to just over $80 per barrel.
Gold prices set a new record, topping $1,716 per ounce.
"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."
Among individual stocks, Bank of America (NYSE: BAC) shares suffered a stinging 20.1 percent drop after American International Group (NYSE: AIG) filed a lawsuit alleging the bank sold it mortgage-backed securities at inflated prices.
AIG is seeking at least $10 billion in damages.
Finally, the VIX index – the so-called “gauge” of investor fear – spiked a phenomenal 47.4 percent to 47.2 – its highest level since May 2010.