* Banking, materials sectors hardest hit
* About 97 percent of NYSE stocks in negative territory
* Some analysts view slide as a time to buy
* Dow off 3 pct, S&P down 4 pct, Nasdaq off 4.2 pct
* For up-to-the-minute market news see [STXNEWS/US]
(Updates to afternoon trading, changes byline)
By Ryan Vlastelica
NEW YORK, Aug 8 Investors fled stocks on
Monday in the first session since Standard & Poor's cut the
United States' perfect AAA credit rating, reflecting growing
discouragement about the economic outlook and Washington's
ability to meet the challenges.
Monday's sharp losses extended the slide on Friday, when
Wall Street wrapped up its worst week in more than two years
on concerns about flagging economic growth and fears of a
financial meltdown in the euro zone. The S&P 500 is down
nearly 16 percent from its closing high reached on April 29,
putting it solidly in correction territory.
The CBOE Volatility Index .VIX, Wall Street's "fear
gauge," jumped 21.2 percent to 39.04, after topping 40 for the
first time since May 2010 at its intraday peak.
While all 10 S&P sectors fell more than 1 percent, the
groups most sensitive to the economy, such as banking and
commodities, were the hardest hit. The S&P financial index
.GSPF sank 5.9 percent while an S&P energy index .GSPE
lost 4.5 percent.
"The downgrade was more of a psychological blow that piled
onto a market that was already reeling," said Mike Gibbs,
managing director and chief market strategist at Morgan Keegan
in Memphis, Tennessee.
"When you get this kind of panic and fear into the market,
it goes beyond any realistic or sensible level. I wouldn't put
all my money in stocks right now. I'd hold some back."
The Dow Jones industrial average .DJI dropped 345.91
points, or 3.02 percent, to 11,098.70. The Standard & Poor's
500 Index .SPX slid 48.04 points, or 4.01 percent, to
1,151.34. The Nasdaq Composite Index .IXIC lost 105.47
points, or 4.16 percent, to 2,426.94.
Late on Friday after the market's close, S&P cut the U.S.
long-term credit rating by onenotch to AA-plus on concerns
about debt levels in the world's largest economy. The
downgrade could eventually raise borrowing costs for the U.S.
government and companies, as well as for consumers. For
details, see [ID:nLDE77500Z]
In Monday's session, Bank of America Corp (BAC.N) was the
most actively traded stock on the New York Stock Exchange and
the S&P 500's biggest loser, plunging 15.9 percent to $6.87.
United States Steel Corp (X.N) slid 8.9 percent to $30.25.
Only four of the S&P 500's components were in positive
Monday's selling extended to other assets, with U.S. crude
oil futures down about 4 percent, or $3.36, at $83.52 a
Gold, which is seen as a safe haven, surged 4.1 percent to
above $1,714 an ounce and rose above platinum prices for the
first time since December 2008.
Even the European Central Bank's dramatic intervention in
bond markets, which pushed down yields on Spanish and Italian
bonds, was not enough to stem selling. [ID:nLDE7770NM]
GETTING CLOSE TO A BOTTOM?
But some analysts noted the mass selling has made some
stocks attractive at lower prices.
"This is a very oversold market that has come down far too
rapidly," Gibbs said. "We're due for a bounce and the
opportunity for one is good at the levels we're at. Still,
it's nearly impossible to pick a bottom in this environment."
Barclays Capital, in a note to clients, wrote that the
decline created a "time to buy," and that the recent losses
"left equity valuations at levels of cheapness not seen since
the early 1980s."
Declining stocks outnumbered advancing issues on the New
York Stock Exchange by a ratio of 30 to 1, while on the
Nasdaq, decliners beat advancers nearly 8 to 1.
In company news, Verizon Communications Inc (VZ.N) fell
3.4 percent to $33.85 a day after nearly half of its wireline
business employees went on strike. The drop in the Dow
component's stock was not as steep as the broader market's
decline because telecom is viewed as a defensive sector.
(Reporting by Ryan Vlastelica; Editing by Jan Paschal)