Stocks plunged Monday after two big rating agencies criticized a fiscal pact hatched at last week's summit of European leaders aimed at ending the region's debt crisis.

Fitch Ratings said at midday that the deal to bind Europe's budgets more closely made little difference. Fitch predicted that the region would face "a significant economic downturn" as it wrestles with the sovereign debt crisis, which may last "throughout 2012 and probably beyond."

The Dow Jones industrial average dove 234 points in afternoon trading. The euro fell more than 1 percent against the dollar and the yields on Italian bonds rose as investors fretted about that nation's debt burden. European stocks closed sharply lower.

Moody's Investors Service said earlier in the day that it will review the credit ratings of every European Union nation in the first quarter of next year. The statement doused optimism among investors that had lifted stocks and other risky assets late last week.

The summit produced "few new measures" and Europe remains in a "critical and volatile stage," Moody's said in a published report. It noted that the pact does not address Europe's immediate problem: the crushing debt loads of some nations and their rising borrowing costs.

The agreement "kicks off a process that has a chance of solving the next crisis, not this one," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. "The problem is the changes they've agreed to go toward solving the root of current problems 12 months from now."

Stocks fell broadly, with declines for all 30 stocks in the Dow Jones industrial average and all 10 industry groups in the Standard & Poor's 500 index.

The Dow fell 234 points, or 1.9 percent, to 11,950 1:15 p.m. Eastern. Intel Corp. fell 4.9 percent after the chipmaker said a shortage of hard drives will limit shipments, pushing its fourth-quarter revenue outlook far below what Wall Street had expected.

The Standard & Poor's 500 index fell 27 points, or 2.1 percent, to 1,228. The Nasdaq composite index dropped 50 points, or 1.9 percent, to 2,596.

Financial stocks fell sharply on fears that big banks could be damaged by the turmoil in the European financial system. Bank of America Corp. fell 4.9 percent, JPMorgan Chase & Co. 4 percent and Citigroup Inc. 5.8 percent.

The warning from Moody's helped deflate optimism about last week's pact, which called for tougher fiscal discipline in countries the euro and greater oversight of national budgets by a central authority.

The yield on the 10-year Treasury note fell to 2.01 percent from 2.07 percent late Friday, indicating stronger demand for low-risk investments. Bond yields fall as demand for them increases.

The agreement does not address the heavy debt loads of many nations and their rising borrowing costs. Greece, Portugal and Ireland have had to accept bailouts. Italy and Spain are teetering because investors are demanding higher interest rates on bonds issued by those governments, which increases borrowing costs for those countries.

The yield on the benchmark Italian 10-year bond rose to 6.53 percent. Greece and Portugal were forced to seek bailouts from their creditors when their bond yields approached 7 percent.

Stocks in Italy led European markets lower. Italy's FTSE MIB closed down 3.8 percent, Germany's DAX 3.4 percent and Spain's IBEX 35 3.1 percent.

Also among the top corporate movers:

— Endo Pharmaceuticals Holdings Inc. jumped 6.1 percent after federal regulators approved a new form of one of its pain medications, extending its patent rights over the drug.

— Diamond Foods Inc. plunged 24.5 percent after reports of an investigation of its payments to walnut farmers. Lawsuits already have been filed, and more are expected.

— Vulcan Materials Co. shot up 17.4, the most in the S&P 500, after Martin Marietta Materials Inc. made an unsolicited bid to buy the company for $4.74 billion in stock. Martin Marietta rose 3.2 percent.