Updated 10.02 p.m.
The Dow Jones Industrial Average plummeted 625 points, or 5.5 percent this evening, dropping below the 11,000 level for the first time since November, as markets continued a global sell-off.
US stocks hit fresh lows for the day as President Barack Obama gave a televised speech in which he defended Washington's credit-worthiness and declared that the United States "always will be a triple-A country".
Standard & Poor's lowered the US long-term sovereign debt rating from AAA to AA+ after markets closed Friday, citing Washington's inability to rein in its mounting deficits.
This morning, Standard & Poor's extended its downgrade to mortgage giants Fannie Mae and Freddie Mac, whose bonds are guaranteed by the US government and widely held around the world.
Stock markets in Asia began the global rout. The main stock index fell almost 4% in South Korea and more than 2% in Japan. European markets opened later and fell, too.
It was the first chance for global investors to respond to Standard and Poor's announcement late on Friday that it was reducing its credit rating for long-term US government debt by one notch, from AAA, the highest rating, to AA+.
The move was not a total surprise but came when investors were already feeling nervous about a weak US economy, European debt problems and Japan's recovery from its March earthquake.
Fresh memories of the financial crisis three years ago are also driving investors away from risky investments and into what is considered safer.
"Fear of a repeat of 2008 is what's really driving investments," said Gary Schlossberg, senior economist with Wells Capital Management.
Gold, which investors traditionally buy when they want a safe investment, rose above 1,700 dollars per ounce for the first time. Its price remains below its 1980 record after adjusting for inflation.
Prices for US government debt rose - even after S&P essentially said they were a riskier investment than the debt of some other major world economies - because Treasury bonds are still seen as one of the world's few safe havens. Prices rise as demand increases.
Where Treasury prices finish the day will be more important than where they are at the start, Bill O'Donnell, head of US Treasury strategy at RBS Securities, said.
"I want to see how the market clears and how it synthesises the cacophony of news of late."
Investors are worried that Spain or Italy could become the next European country to be unable to pay its debt. The European Central Bank said it will buy Italian and Spanish bonds in hopes of helping the countries avert a possible default.
Seeking to avert panic spreading across financial markets, the finance 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 financial stability and growth.
"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.
Crude oil, natural gas and other commodities fell on worries that a weaker global economy will mean less demand. Oil fell $2.84 to $84.04 per barrel.
Last week, the Dow Jones industrial average fell almost 700 points. That was its biggest point loss since October 2008, during the financial crisis. The Dow has dropped in nine of the last 11 trading days.
Worries about the US economic recovery have been building since the government said that economic growth was far weaker in the first half of 2011 than economists expected.
Then reports showed that the manufacturing and services industries barely grew in July.
Fears about a weaker US economy have overshadowed profit growth businesses have reported.