The Dow Jones fell 634 points on Monday on the heels of the S&P downgrade of the United States triple A credit rating. The drop was the sixth-worst point decline in the past 112 years and the worst one-day drop since December 2008. Every stock in the Standard & Poor’s 500 index declined.
The sell-off threatened to further sap confidence in the faltering U.S. economy, giving businesses and consumers another reason to cut back on spending. “What’s rocking the market is a growth scare,” said Kathleen Gaffney, co-manager of the $20 billion Loomis Sayles bond fund. “The market is under a lot of stress that really has little to do with the downgrade.” Instead, Gaffney said, investors are focused on “how Europe and the U.S. are going to work their way out of a high debt burden” if economic growth remains slow.
The severe losses in stocks brought a torrent of criticism of S&P in Internet forums, as some angry investors noted that the firm had helped fuel the 2008 financial crisis by underestimating the risks of securities backed by subprime mortgages. President Obama, in a midday speech from the White House, did not directly criticize the company but said the ratings were irrelevant. “Markets will rise and fall, but this is the United States of America,” Obama said. “And no matter what some agency may say, we’ve always been and always will be a AAA country.”
The S&P 500 fell 79.92, or 6.7 percent, to 1,119.49. The Nasdaq composite index fell 174.72, or 6.9 percent, to 2,357.69. Crude oil, natural gas and other commodities fell sharply on worries that a weaker global economy will mean less demand. Oil fell 6.4 percent to settle at $81.31 per barrel.
Gold set a record. It rose $61.40 to settle at $1,713.20. “This is largely a flight to safety,” said Thomas Simons, money market economist with Jefferies & Co. “The bond market is really trading off of what’s going on in the stock market.” Money flowed out of stocks and into Treasurys.By: Michael Stevens
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