Asian markets dropped and European shares opened lower as a global sell-off widened. The euro was poised to resume its slide after plummeting to levels not seen in a year, while oil prices dropped below $82 a barrel.
In the U.S. Friday, theto 10,991.99 in its worst loss in almost three months. The Standard & Poor's 500 index fell 28.34, or 2.3 percent, to 1,183.71.
Concerns about Europe intensified after Standard & Poor's downgraded Greece's debt to junk status and cut Portugal's credit rating by two notches on Tuesday - making it harder for both countries to pay down their debts and raise money to fund their budgets.
Investors have been on edge for months about Greece's fiscal crisis. The country has already acknowledged it can't pay debts due shortly and has asked for a bailout from European neighbors and the International Monetary Fund.
There's now growing anxiety Portugal could be the next weak European economy to require help, followed by the region's other debt-laden countries like Spain. Not only does the crisis undermine the euro, but it threatens European governments' ability to borrow money at a time when they're spending furiously to heal their economies after the world recession.
"The fear is that Greece and Portugal are just the appetizers," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore. "The concern is it is going to spread and have an impact on the financial system and ultimately on the economy."
As trading opened in Europe, Britain's FTSE 100 shed 0.8 percent, Germany's DAX lost 1.5 percent and France's CAC-40 dropped 1.4 percent. Wall Street futures pointed to more losses in the U.S. Wednesday.
In Asia, Japan's Nikkei 225 stock average led the region-wide retreat with a 2.6 percent fall to 10,924.79 as anxiety about Europe overshadowed earnings reports showing solid recovery among Japanese companies.
Elsewhere, Hong Kong's Hang Seng dropped 1.5 percent to 20,949.40 and South Korea's Kospi was off 0.9 percent to 1,733.91.
Markets in Australia and India retreated between 1 percent and 2 percent. Shanghai closed down 0.3 percent.
Should Greece or another European nation fail to make good on its debt obligations, as investors worry is increasingly likely, the global financial system would suffer an enormous shock, analysts say. Lending markets could freeze up, hampering growth just as the global economy is emerging from last year's recession.
"The markets are vulnerable," said Kirby Daley, senior strategist at Newedge Group in Hong Kong. "Investors have priced in a smooth recovery, and as they realize it will be far from a smooth recovery, if a recovery at all, the market will have to adjust to that. And that means equities will have to fall eventually."
In currencies, the euro stabilized after a steep drop the day before to a near 1-year low before slipping again, trading down at $1.3153 from $1.3155. The dollar rose to 93.42 yen from 93.07 yen.
Oil prices dropped for a second straight day, with benchmark crude for May delivery down 82 cents at $81.62 a barrel.