U.S. stocks slid to session lows on Tuesday after the credit ratings of both Greece and Portugal were cut, escalating worries about their sovereign debt.
Greek bond yields rose to historic highs and their prices tumbled after rating agency Standard and Poor's cut the country's debt rating to below investment grade and also downgraded Portugal by two notches.
Financial stocks remained in focus as Goldman Sachs Group Inc executives testified before a U.S. Senate subcommittee examining Goldman's role in the financial crisis. Goldman's stock was almost flat while the S&P financial index <.GSPF> dropped 2.3 percent.
The markets are really selling off on the combination of the widening sovereign debt crisis and the hammering that is going on in the Senate hearing, said Alan Lancz, president of Alan B. Lancz & Associates Inc in Toledo, Ohio.
Just like in 2008, when you had one big company fall after another, you're now seeing this spread from Greece to Portugal.
The Dow Jones industrial average <.DJI> lost 151.30 points, or 1.35 percent, to 11,053.73. The Standard & Poor's 500 Index <.SPX> fell 20.56 points, or 1.70 percent, to 1,191.49. The Nasdaq Composite Index <.IXIC> dropped 38.77 points, or 1.54 percent, to 2,484.18.
U.S.-traded shares of the National Bank of Greece sank 11.7 percent to $2.73, after earlier hitting a session low at $2.69, their lowest since March 2009.
Reflecting Wall Street's fears of the sovereign debt problems, the CBOE Volatility Index <.VIX> surged nearly 18 percent to 20.59 following the downgrade of Greek ratings into junk territory.
Nearly five stocks fell for every one that rose on the New York Stock Exchange, while on the Nasdaq, decliners outnumbered advancers by a ratio of about 10 to 3.
(Reporting by Rodrigo Campos; Editing by Jan Paschal)