Wall Street sinks, European shares hit 2-year low after US downgrade

US stocks tumbled, the first session after rating agency Standard & Poor's cut the top-tier AAA credit rating of the United States, further unnerving already-skittish investors.

The Dow Jones industrial average dropped 634.76 points, or 5.55 percent, to 10,809.85. The Standard & Poor's 500 Index slumped 79.92 points, or 6.66 percent, to 1,119.46. The Nasdaq Composite Index skidded 174.72 points, or 6.90 percent, to 2,357.69.

European stocks resumed their sell-off, with a blue-chip index dropping for the 11th session in a row.

The FTSEurofirst 300 index of top European shares was down 1.8 percent at 957.63 points in a roller-coaster session marked by huge volumes, while the euro zone's blue-chip Euro STOXX 50 index was down 0.8 percent at 2,356.29 points, losing ground for the 11th session in a row and hitting a two-year low.

Japan's Nikkei stock average slid more than 2 percent as weak sentiment following Standard & Poor's downgrade of the United States' credit rating was exacerbated by futures selling after Asian markets tumbled. The benchmark Nikkei closed down 2.2 percent at 9,097.56 after dropping as low as 9,057.29. The broader Topix fell 2.3 percent to 782.86.