Dow Plunges More Than 600 in Sell-Off

A roller-coaster session on Monday ended up being the worst day for Wall Street in more than two years.

Investors, already concerned about the economy, saw their first opportunity on Monday to shave their portfolios of the assets they viewed as risky. The dropoff comes as the markets struggled to work out the implications of Standard & Poor’s unprecedented downgrade of the nation’s long-term debt Friday night after the markets had closed.

At the close of trading, it turned out to be the worst daily decline for the S.& P. 500-stock index and the Dow Jones industrial average since Dec. 1, 2008. All 500 stocks in the S.& P. fell on Monday; the index ended the day down 79.92 points, or 6.66 percent, at 1,119.46.

The Dow Jones was down 634.76 points, or 5.55 percent at 10,809.85. Its one-day decline is its steepest point loss in a single day since December 2008. The Nasdaq dropped 174.72 points, or nearly 7 percent, to 2,357.69.

“There is a lot of fear out there,” said Laura LaRosa, director of fixed income at the investment firm Glenmede. “The sell-off was massive.”

As investors sought safer places to put their money, stocks were sent plummeting. Gold rose, and many even flocked to government bonds, which held up as a haven.

“Fear is rampant in the market right now, the fear that we will have a double-dip recession,” said Brian M. Youngberg, the energy analyst for Edward Jones. “It is too early to call that, but once the fear bubbles up it can treat the market very harshly.”

S.& P. had warned investors earlier this year that it would act if Congress did not agree to increase the government’s debt ceiling, basically a borrowing limit, and adopt a long-term plan for reducing its debts by at least $4 trillion over the next decade.

Analysts suggested that a rash of bad economic news, coupled with the debt ceiling talks over the past weeks and then the nation’s first-ever downgrade, had driven down stocks.

The declines in stocks followed losses in global markets and set United States equities on track to extend losses that for some recalled the days of the 2008 financial crisis. They also reflected anxiety over the United States economy and Europe’s debt woes.

Earlier in Asia, the Tokyo benchmark Nikkei 225 stock average fell 2.2 percent. In Hong Kong, the Hang Seng index fell 2.2 percent, and in Shanghai the composite index closed 3.8 percent lower. The Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 3.72 percent, while the FTSE 100 index in London fell 3.39 percent.

United States crude oil futures for September delivery fell more than 6 percent to $81.31 a barrel.

The flight to safety benefits bonds, and that held up even though the rating on America’s debt had been slashed.

The benchmark 10-year Treasury yield fell to 2.32 percent, the lowest since January 2009. It was a steep dropoff from the yield of 2.56 percent on Friday.

The auction on Monday of six-month bonds showed the government was actually paying less after the downgrade, with median rates down to 0.05 percent compared with Aug. 1’s result of 0.14 percent.

“It is mostly on the fears of what is going on in Europe and the fears of the U.S. stock market that will push people into bonds,” said Ms. LaRosa of Glenmede. “The fear is really strong right now and the only place you can really go — a robust market where people can feel safe — is with the short-term market.”

The indexes swung wildly on Monday, marked at times by chunks of dips and recoveries.

The situation looked so grim during the day that analysts started talking about a bear market. Howard Silverblatt, the senior index analyst at Standard & Poor’s, noted that if the index declined to 1,090.89, it would be a 20 percent decline from its April 29 peak of 1,363.61. The index closed on Monday down nearly 18 percent.

The grim tone had been set on Wall Street by the dismal performances of lower European and Asian markets, and over the course of the day, stocks in the United States fell sharply as Standard & Poor’s announced additional downgrades, including cuts to the debt ratings of the housing giants Fannie Mae and Freddie Mac, while a speech by President Obama failed to lift spirits.

Financial stocks in particular were hammered, falling nearly 10 percent by the end of the day.