US stocks suffered greatly Monday as the S&P 500 and Nasdaq Index both plunged over 6 percent and the Dow lost 634.76 points after a historic downgrade of the U.S. credit rating by Standard & Poor's.

The Dow Jones Industrial Average was down 5.55 percent to 10,809.85. The Standard & Poor's 500 tumbled 79.92 points, or 6.66 percent, to 1,119.46, its largest drop in nearly three years. The Nasdaq Composite Index dropped 174.72 points, or 6.90 percent, to 2,357.69.

All sectors were in the negative territory with capital goods, energy and financial sectors leading the laggards.

Late on Friday, the rating agency Standard & Poor's downgraded the U.S. credit rating from AAA to AA+, a move reflecting the agency's concern over the world's largest economy's debt problems.

Investors rushed to pull out their bet on the equity markets Monday, the first day they could react to the downgrade. The CBOE Volatility Index, which is regarded as the best gauge of investors' anxieties, jumped 50 percent to 48.00, its first leap above 40 since May 2010.

Besides U.S. debt concerns, investors also worried that Spain or Italy could become the next European country to fail to pay its debt.

Although the European Central Bank (ECB) said it would buy Italian and Spanish bonds to help the countries avoid a possible default, investors feared that given the much larger economic scale, compared with Greece and Portugal, it would be much harder for the ECB to rescue the eurozone's third and fourth largest economies.

In other markets, the gold price was pushed higher by risk-averse investors. Gold futures rallied 4.2 percent to close at a record high of 1,718 dollars per ounce.