The U.S. Treasury Friday night hit back at a Standard and Poor's (S&P) downgrade of U.S. top-notch credit rating, saying the agency's judgment was deeply flawed.

"A judgment flawed by a 2 trillion U.S. dollars error speaks for itself," a spokesperson of the Treasury said in a short statement, stopping short of elaboration.

The global rating agency Friday stripped the world's largest economy of its AAA long-term sovereign credit rating and lowered it by one notch to AA-plus.

It was the first time that the U.S. credit rating was downgraded since it received an AAA rating from Moody's in 1917. The United States has held the S&P rating since 1941.

The debt downgrade was a blow to and an embarrassment for U.S. President Barack Obama, his administration and the country, and could raise costs of U.S government borrowing.

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a research report.

"The outlook on the long-term rating is negative," noted the agency, implying it might further lower the U.S. credit rating.

"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011," according to the report.

Obama Tuesday signed a bipartisan bill on raising the nation's debt limit through 2013 and cutting the deficit by more than 2.1 trillion dollars into law, hours before a crucial deadline to avoid a catastrophic default, ending a months-long perilous stalemate.

But the 2-trillion-dollar-plus deficit-cutting package put together by lawmakers and the White House still fell short of the 4 trillion dollars cited by S&P to avoid a downgrade of the top-notch credit rating.

The U.S. Federal Reserve said Friday night that the downgrade of S&P would not affect the treatment of Treasury securities for risk-based capital purposes or under other bank rules.

"For risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change," the Fed said.

U.S. Treasuries bonds used to be considered the safest investment worldwide. The downgrade is expected to further spook global investors as they are already struggling to deal with financial turmoils in recent weeks amid an escalating euro zone debt crisis and a stagnated world economic recovery.

This week, the failure to effectively deal with the political gridlock and address a slowing down economy has led to the worst weekly losses in the U.S. stock markets in two years.

Meanwhile, the U.S. Labor Department said the U.S. economy added 117,000 jobs to nonfarm payrolls in July, with the unemployment rate falling slightly to 9.1 percent from 9.2 percent. Investors were slightly relieved on the data, but they didn't think the number was strong enough to rally the stock.

Chinese rating agency Dagong Global Credit Rating Co. Wednesday cut the U.S. credit rating from A+ to A with a negative outlook after the U.S. government raised its debt limit.

The decision to lift the debt ceiling wouldn't change the fact that the U.S. national debt growth has outpaced that of its overall economy and fiscal revenue, which would lead to a decline in its debt-paying ability, said Dagong Global.

China is by far the largest foreign holder of U.S. debt, with holdings amounting to 1.15 trillion dollars as of the end of April.

In Europe, as the bond yields of Italy and Spain, two major euro-zone economies, soared quite a lot, investors worried the two countries will be about to default on their debt without the help of the European central bank (ECB).

Investors fear the debt problems in Italy and Spain, if unchecked, could prove to be far more nastier than those in some peripheral countries like Greece, Ireland and Portugal.

To comfort the market, the ECB said Friday that it would buy Italian and Spanish bonds in exchange for fiscal reforms.

However, markets were unconvinced the ECB bond buying would be effective in stopping the debt crisis contagion, while some were disappointed Italian and Spanish bonds, whose yields climbed above 6 percent recently, were not the target of the purchases.