DOW

Dow 10,809.85 -634.76 -5.55% 

Dow Skids 600, Worst Day Since Credit Crisis

By: JeeYeon Park

CNBC.com Writer

Stocks took a sharp nosedive in another choppy day Monday to finish at session lows as investors fled from risky assets following S&P's downgrade of U.S.'s credit rating last week in addition to ongoing economic jitters.

The Dow Jones Industrial Average plunged 634.76 points, or 5.55 percent, to finish at 10,809.85, well below the psychologically-significant 11,000 mark. The move marks the blue-chip index's biggest point and percent drop since Dec. 1, 2008.


The S&P 500 plummeted 79.92 points, or 6.66 percent, to close at 1,119.46, its lowest close since Sept. 10, 2010.


Nasdaq sank 174.72 points, or 6.90 percent, to end at 2,357.69, its lowest close since October 4, 2010.

August is already on track to be the worst month for the S&P and Nasdaq since Oct. 2008.


The CBOE Volatility Index, widely considered the best gauge of fear in the market, spiked above 40 to touch its highest level since Mar. 2009.


Volume was very heavy with the consolidated tape of the NYSE at 9.29 billion shares, while 2.54 billion shares changed hands on the floor. That exceeded last Friday's heavy volume, which was the heaviest since the Flash Crash on May 6, 2010. According to Dow Jones, this was the 4th largest volume day in history on the NYSE.


“Once we took out Friday’s lows, it was like a trapdoor opened,” Art Cashin, director of floor operations at UBS Financial Services told CNBC. “This is very heavy volume again and that tells me that we’ve got people liquidating to raise cash."

Moody's said while they are maintaining the U.S.'s AAA status, the agency said it has doubts over the long-term enforceability of the budget cuts already decided by Congress.


This comes after Standard & Poor's move to downgrade U.S.'s rating to AA-plus from AAA last Friday after a wild week for stocks—its worst in more than two years.

And in its latest move, S&P also lowered Fannie Mae, Freddie Mac and Federal Home Loan Bank's debt to AA-plus from AAA.

S&P came in for significant criticism from U.S. Treasury Secretary Timothy Geithner, who said the rating agency showed "terrible judgment" in lowering the U.S. government’s credit rating.

Meanwhile, President Obama said financial markets around the world "still believe our credit is AAA and the world's investors agree," although his speech did little to cheer up the market.

David Beers, global head of sovereign ratings at S&P, defended the firm's position, despite the discovery of a $2 trillion error in the firm's calculation of the projected debt to GDP ratio for the U.S.


Meanwhile, S&P also revised Berkshire Hathaway's [BRK.A 101000.00 -6300.00 (-5.87%) ] rating outlook to "negative" from "stable."

Incidentally, this comes after Warren Buffett said S&P's downgrade of the U.S. "doesn't make sense" and told CNBC he was not changing his mind about Treasurys based on S&P's downgrade.