U.S stocks followed the trend of global markets Monday and plummeted on the first day markets opened since Standard & Poor's downgraded the U.S. credit rating.
On a day when the Dow Jones industrial average fell 634.76 points in afternoon trading, President Barack Obama said the U.S. remains a AAA country despite its credit rating down grade last Friday.
Obama said financial markets "still believe our credit is AAA. I and the world's investors agree."
Every stock in the Standard & Poor's 500 index declined. It was the sixth worst point decline for the Dow in the last 112 years and worst one-day drop since December 2008.
S&P cut the long-term debt rating from AAA to AA+ late Friday amid growing concern about economic stability by nervous investors rattled by the weak U.S. economy, growing European debt troubles and Japan's recovery from its earthquake in March.
"With the U.S. Treasury losing its AAA, what that means is that in the future that more downgrade to the U.S. Treasury are likely because once a rating moves down a notch, it is more likely to move down again," said Matt Fabian of independent research group Municipal Markets Advisors.
S&P also downgraded the credit rating of Fannie Mae and Freddie Mac and other agencies linked to long-term U.S. debt on Monday as experts weighed the likelihood of additional downgrades.
The sell-off began the moment the opening bell was rung at the New York Stock Exchange on Monday.
"I realized that we were going to have a rather horrendous opening," said Arthur Cashin, director of floor operations for UBS Financial Services.
Cashin said U.S. traders began the day Monday spooked by sharp drops in global stock markets, including a 7 percent decline in the Tel Aviv Stock Exchange’s benchmark index of 25 stocks.
But S&P's decision to announce the downgrade of U.S. debt after the close of trading on Friday may have insulated the market from a greater pullback.
"We've had 48 hours to digest it. Most traders looked at it and said, 'You can't sugarcoat it; it's bad, but it's not traumatic,'" said Alan Valdez, DME Securities' head of floor trading.
Valdez said in a conference call Sunday night, most of his clients expressed a cautious attitude, but not panic.
"A lot of them, the guys that are in the market aren't selling. They're gonna watch it. They're just staying on the sidelines," Valdez said, noting the trading volumes were low Monday morning.
A bigger worry than the U.S. credit downgrade may be the ongoing European debt crisis. Over the weekend the European Central Bank said it would start buying Italian and Spanish bonds, in an effort to stave off crises in two of the Eurozone’s bigger member states.
"These are problems that are too big to fail, and the fact is, they're just kicking the can down the road," Valdez said.
In an attempt to avert panic, financial ministers and central bankers of the Group of 20 industrial and developing nations issued a joint statement Monday saying they were committed to taking all necessary measures to support global financial stability.
"We will remain in close contact throughout the coming weeks and cooperate as appropriate, ready to take action to ensure financial stability and liquidity in financial markets," they said.
Concern about U.S. economic recovery has been increasing since the government said economic growth was far weaker in the first half of 2011 than predicted.
Job growth last month was better than economists expected but the 117,000 jobs added remains below the average of 215,000 that employers added between February and April.
With the Associated Press