As of 2:07 p.m. ET, the Dow Jones Industrial Average slid 441 points, or 3.8%, to 11,006, the S&P 500 tumbled 58.8 points, or 4.9%, to 1,141 and the Nasdaq Composite dipped 125 points, or 4.9%, to 2,408. The FOX 50 sank 36 points, or 4.1%, to 829.

Volatility has been extremely high in recent trading sessions. The selloff over the past two weeks has been so furious in fact that "its force now rivals almost anything we’ve seen in the post war era," according to Daniel Greenhaus, chief global strategist at BTIG. The VIX, often referred to as a fear gauge, surged 32% to a 52-week high.

Financial shares like Dow-component Bank of America (BAC: 6.36, -1.81, -22.15%) and Citigroup (C: 27.14, -6.30, -18.84%) took the biggest hit in mid-day trade, but every major sector was deep in the red. All but one component of the Dow was in the red, while only four of the 500 issues in the S&P 500 were in the green.

For the first time in history, S&P cut America's top-notch credit rating one notch to AA-plus from AAA after the close of trading on Friday. The ratings company also said Monday it would slice Fannie Mae and Freddie Mac's debt rating because the mortgage companies directly rely on the U.S. government.

S&P's move came as a result of concerns over the country's substantial public debt burden and deep divides within Congress that almost sparked an unprecedented default on U.S. sovereign debt. Moody's Investor Service, another ratings company, affirmed American's AAA rating, while Fitch is still performing a review.

Many large investors noted the short-term impact of the downgrade may be muted, however, it could foreshadow deeper economic issues.

BlackRock said in a release the move by S&P "does not imply a fundamental increase in risk" and shouldn't prompt investors to "change their behavior solely on the downgrade." However, the company that manages $3.7 trillion in assets warned that "continued economic weakness and regulatory uncertainty ... may provide a signal to some investors to reassess their risk appetite."

A round of disappointing economic data, capped with a mixed monthly employment report has weighed heavily on sentiment in recent weeks. There are only a handful of data releases scheduled for the first half of the week, however, traders are expected to pay close attention to the Federal Reserve's statement on Tuesday to see if the central bank signals another round of quantitative easing.Read More