U.S. stocks tumbled on high volume on Tuesday as investors shunned risk after the credit ratings for both Greece and Portugal were downgraded.

Financial stocks remained in focus as Goldman Sachs Group Inc executives sought to fend off accusations they helped inflate the housing bubble and made billions off the collapse as they testified before a Senate subcommittee. Goldman stock rose 1.1 percent, but the S&P financial index <.GSPF> dropped 1.7 percent.

The cost of insuring Greek and Portuguese debt against default rose to record highs after rating agency Standard and Poor's cut Greece's rating to junk status and downgraded Portugal by two notches.

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> dropped 108.98 points, or 0.97 percent, to 11,096.05. The Standard & Poor's 500 Index <.SPX> lost 15.06 points, or 1.24 percent, to 1,196.99. The Nasdaq Composite Index <.IXIC> fell 27.40 points, or 1.09 percent, to 2,495.55.

The S&P 500 broke through a technical resistance level and chartists now look at 1,180 as a near-term support. Mid-term support is seen at around 1,150, the peak the benchmark hit in January.

U.S.-traded shares of the National Bank of Greece sank more than 14 percent to $2.64, after earlier hitting a session low at $2.61, their lowest since March 2009.

The euro fell more than 2 percent against the yen and was trading near its 12-month low against the U.S. dollar.

Reflecting Wall Street fears over the sovereign debt problems, the CBOE Volatility Index <.VIX> surged more than 20 percent to its highest since February.

3M Co was among just three Dow components in the positive zone, up 2.1 percent at $89.27 after posting better-than-expected quarterly profits and raised its full-year outlook.

Nearly five stocks fell for each one that rose on the New York Stock Exchange, while decliners outnumbered advancers by a ratio about 10 to 3 on the Nasdaq.

(Additional reporting by Ryan Vlastelica)