The stock market buckled Monday under the weight of a crisis in Europe and danger of recession at home. Reeling from a downgrade of American debt, the Dow Jones industrials plunged 634 points.
It was the worst day for the market since the financial crisis in the fall of 2008 and extended Wall Street's sudden, sharp decline. Stocks have lost 15 percent of their value in just 2½ weeks.
Monday was the first trading day since Standard & Poor's downgraded the United States' risk-free credit rating, and the selling started at the opening bell. The Dow dropped 250 points in minutes. For the rest of the day, investors looked for safer places for their money. With few buyers left for stocks, the market could only drift lower.
The Dow finished the day down 5.5 percent. The point decline was the worst since Dec. 1, 2008, and the sixth-steepest ever. The average ended at 10,809.85, its first close under 11,000 since November.
President Barack Obama on Monday essentially dismissed the United States' first-ever downgrade, telling investors and the public that the nation's leaders need only show more "common sense and compromise" to tame the nation's accumulation of debt.
Seeking to demonstrate command in a volatile economic climate, Obama said he hoped the decision by Standard & Poor's would at least give Congress a renewed sense of urgency to tackle debt problems. He said that must be done mainly by taking on the politically difficult issues of reforming taxes and entitlement programs in the coming months.
Obama said Washington had the power to fix its own political dysfunction.
"Markets will rise and fall," he said. "But this is the United States of America. No matter what some agency may say, we've always been and always will be a triple-A country."
In a bit of irony after the S&P downgrade, investors decided U.S. debt was one of the safest places to be. They also sought refuge in gold, which set a record price.
"The S&P downgrade of U.S. government debt is the least of our problems," said economist Scott Brown at Raymond James & Associates. "The bigger worry is subpar economic growth and the threat of a new recession."
Economists at Goldman Sachs peg the chances of another recession at one in three, most likely in the next six to nine months. The threat was barely talked about earlier this summer.
The U.S. economy grew at a feeble 0.8 percent annual pace the first half of 2011, its slowest since the end of the recession in June 2009. Manufacturing and consumer spending have slowed.
Two Nevada lawmakers running for U.S. Senate had differing takes Monday on the downgrade and the stock market fallout.
Sen. Dean Heller, R-Nev., said the stock market plunge was a further sign that Congress dropped the ball on passing a stronger deficit-reduction bill that could have included tax reform and changes to health and retirement programs.
"While it is unclear at this point what the full impact of the credit downgrade will be, it is clear that Congress should have seized the moment to pass a debt reduction plan that placed our nation on a path towards fiscal sustainability," said Heller, who voted against the $2.4 trillion debt bill passed last week.
"I agree with the president that our problems are solvable, and I look forward to seeing his plan," Heller said in a statement.
Rep. Shelley Berkley, D-Nev., who is challenging Heller for the seat, pointed a finger at Republicans, saying "Their tea party agenda rejects any compromise needed to find solutions that will create good paying jobs."
House Republicans dismissed proposals that could have yielded $4 trillion in deficit cuts because tax increases, which they strongly rejected, would have been part of the mix.
Kate Marshall, a Democratic candidate for the 2nd Congressional District, said Monday that she opposes any reduction in Social Security and Medicare benefits and backs tax reductions only for companies that hire more workers.
"You don't balance your budget on the safety net that prevents people from going into poverty," Marshall said at a Reno news conference, adding that she would support letting Medicare and Social Security negotiate with pharmaceutical companies for lower prescription drugs for senior citizens.
Marshall and Republican Mark Amodei face off in a special Sept. 13 election to fill the vacancy that occurred when Heller was appointed to the Senate to replace John Ensign.
Peter DeMarco, Amodei's spokesman, accused Marshall of using "scare tactics" to mislead people into thinking former state senator Amodei would drastically change Medicare and Social Security.
He noted Amodei as a legislator in 2009 voted for a resolution calling for the full funding and preservation of Medicare.
Amodei, he added, in coming days will make it clear how he stands on Medicare and Social Security reforms.
Oil prices plunged 6 percent to the lowest price of the year Monday: $81.31 a barrel. Investors predict a weakening economy means that consumers and businesses will buy less gasoline.
The turmoil in the U.S. markets was the end of a daylong rout that swept the world. Stocks lost 4 percent in South Korea and 2 percent in Japan, then 5 percent in Germany and 4 percent in France.
In the U.S., stocks fell though Moody's, another major credit rating agency, stood by its top rating of Aaa for the United States. It said it could downgrade the United States if it did not cut its deficit, "but it is early to conclude that such measures will not be forthcoming."
Because the federal government seems unlikely to do much to stimulate the economy, attention is turning again to the Federal Reserve, which meets today .
Stephens Washington Bureau Chief Steve Tetreault and Capital Bureau Chief Ed Vogel contributed to this report.