The S&P 500 is dropping at a slower rate in afternoon trading after getting hammered in the morning session, although it is still on pace to post its worst trading session in 2010.

The S&P 500 lost 26.31 points, or 2.39 percent, to trade at 1,071.09 at 2:55 p.m. EST. The Dow Jones Industrial Average lost 209.87 points, or 2.04 percent, to trade at 10,060.68.

Most European indices booked more than half of their losses in the morning U.S. session when a disappointing U.S. unemployment claims report was released and fears over Greek debt intensified. Germany's DAX Index closed down 2.45 percent, the U.K FTSE 100 Index closed down 2.17 percent, and the Spain Madrid General Index plunged 6.08 percent.

As risk aversion set in, the yen and dollar surged against higher yielding commodities currencies. Since the opening of the U.S. stock market, the Australian dollar lost as much as 160 pips against the dollar and 317 pips against the yen.

However, the forex market has stabilized in afternoon U.S. trading. Since 11:30 a.m. EST, AUD/USD and AUD/JPY have been range-bound. Similarly, the euro has also halted its decline against the dollar.

The Chicago Board Options Exchange Volatility Index (VIX), which measures the implied volatility of S&P 500 options, has also flattened around 25.0 points in afternoon trading.

Commodities and financial firms are still the biggest decliners today, although they sold less heavily in the afternoon.

Financial firms, especially European companies, have been hit by worries about European sovereign debt. Investors are eyeing Spain and Portugal now, in addition to Greece, as the spread of credit default swaps for the government debt of these countries all increased today.

Commodities, many of which are denominated in dollars, fell and firms related to commodities were hit hard. Prices of oil, copper, gold, silver, and platinum all plunged today.

The Dow Jones U.S. Basic Materials Index dropped 3.58 percent and the Dow Jones U.S. Financials Index dropped 2.76 percent.

Among the biggest decliners of the Dow are: Alcoa (NYSE:AA), down 3.56 percent, Bank of America (NYSE:BAC), down 3.73 percent, and JPMorgan (NYSE:JPM), down 3.28 percent.

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