By Arun Kumar  

Washington, Aug 8 (IANS) US stocks plunged sharply as Wall Street opened Monday, the first day of trading after Standard & Poor's historical downgrade of the United States' top notch AAA credit rating to AA+.

The Dow Jones industrial average sank 350 points, or 3 percent; the S&P 500 lost 43 points, or 3.7 percent; and the Nasdaq Composite dropped 101 points, or 4 percent, according to CNN.

Losses accelerated after S&P, in a move related to the US downgrade, lowered the ratings of mortgage finance firms Fannie Mae and Freddie Mac.

Monday's selloff was broad, with 29 out of the Dow 30 and 496 members of the S&P 500 trading in the red. The blue chips were dragged lower by a 8 percent drop in Bank of America shares and a 4 percent decline in shares of Alcoa.

The VIX (VIX) -- Wall Street's so-called "fear' index -- jumped 17 percent to 37.43. "It's the highest level for the VIX in more than a year, CNN said.

"Investors are having one reaction to the downgrade: sell first and ask questions later," Paul Zemsky, head of asset allocation with ING Investment Management was quoted as saying by the news channel.

However, in the midst of the turmoil, one early positive sign was the decline of the yields on the government's 10-year Treasury bond.

The yield fell Monday to 2.47 from Friday's close of 2.56, indicating that investors still viewed US government debt as a safe place to park their money, despite the credit-rating downgrade, the Washington Post said.

Meanwhile, on Tuesday, the Federal Reserve, the US central bank, is set to meet amid increasing signs that the US economic recovery is faltering.