YAHOO [BRIEFING.COM]: Stocks were slammed today with their worst single-session percentate loss since December, 2008. On the surface, the rout came in response to news that analysts at Standard & Poor's cut the US debt rating, but selling was really due mostly to what the downgrade suggested about macro conditions.

In an unprecedented move, analysts at S&P lowered their rating on US debt during the weekend. In turn, US debt is now rated AA+, down from the top-notch rank of AAA. Given that S&P is widely regarded as the most influential rating agency, it mattered little to market participants that Moody's affirmed their AAA rating on the US.

Although many reports may blame this session's precipitous drop on the S&P downgrade, the sell-off really came in response to what the downgrade signified, which is that the US economic outlook isn't as strong as what many had thought. Moreover, any setback in economic activity could further strain US fiscal conditions, which were only recently addressed after weeks of wrangling among legislative leaders. Of course, the threat that the tenuous fiscal and financial conditions of Europe could deteriorate and create contagion have added to concern.

Amid heightened concerns about the macro environment, many traders are dumping stocks in the interest of building liquidity. Of course, their aggressive selling has only begotten additional selling among stocks.

Financials were hit especially hard this session. The sector slumped to a 10% loss so that it is now down 29% from its February high. Bank of America (BAC 6.51, -1.66) was one of the sector's worst performers. It set a two-year low on its way to a 20% loss as some investment funds liquidated their positions in the stock. It didn't help that the bank was hit with a $10 billion mortgage suit by AIG.

Widespread weakness caused the Volatility Index, often euphemistically dubbed the Fear Gauge, to surge 50% to 48.0 for the first time May 2010. Given the fearfulness exhibited by investors, it wasn't such a surprise that gold continued its climb. Still, it was impressive that the yellow metal surged 4% then extended the climb in after-hours trade to a new record high above $1720 per ounce.

Both the dollar and Treasuries benefited from an interest in safety, too. The greenback was up about 0.5% against a basket of major foreign currencies at the end of the trading day. Meanwhile, the yield on the benchmark 10-year Note settled only a couple of basis points above 2.3%.

The S&P downgrade of US sovereign debt, to AAA+ to AA+, sent a shockwave through the markets today. The flight to safety was in full-effect , as the precious metals closed with large gains, while riskier commodities like crude oil finished the session sharply lower... Dec gold finished up 3.7% to $1713.50 per ounce, while Sept silver ended up 3% to $39.37 per ounce. Gold futures have extended their move higher in afterhours trade, notching new all-time highs at $1723.40 per ounce.

Sept crude oil finished lower by 6.4% to $81.31 per barrel. Futures sold off sharply into the close, dropping around two points to fresh lows around $81 per barrel -a sell-off that coincided with fresh lows in the equity markets. That sell-off has extended into afterhours trade, with futures notching new lows at $80.55, their lowest levels since Nov 22. Sept natural gas finished near flat at $3.94 per MMBtu.

Advancing Sectors: (None)
Declining Sectors: Consumer Staples -3.8%, Health Care -5.3%, Telecom -5.4%, Utilities -5.5%, Tech -5.8%, Consumer Discretionary -6.7%, Industrials -6.9%, Materials -7.3%, Energy -8.3%, Financials -10.0%DJ30 -634.76 NASDAQ -174.72 NQ100 -6.1% R2K -8.9% SP400 -8.3% SP500 -79.92 NASDAQ Adv/Vol/Dec 114/3.98 bln/2535 NYSE Adv/Vol/Dec 42/2.54 bln/3030