WSJ NEWS ALERT: Stocks Sink After S&P Cuts U.S. Ratings Outlook to Negative


Standard & Poor’s Ratings Services cut its outlook on the U.S. to negative, warning that the U.S. fiscal profile may become “meaningfully weaker” than that of other major countries if policy makers can’t tame the budget deficit and increasing the likelihood of a potential downgrade from its triple-A rating.

The ratings move surprised markets. The Dow Jones Industrial Average sank 226 points, or 1.8%, to 12113 in mid-morning trade, while the Standard & Poor’s 500 index dropped 23 to 1296. It was both measures’ biggest one-day drop in nearly a month. The Nasdaq Composite fell 57 to 2708.

Shortly after the news was released, the dollar was at about ¥82.65, compared with about ¥82.89 before S&P changed the outlook and ¥83.08 late Friday. Longer-dated Treasurys dove into negative territory, with the benchmark 10-year down 6/32 to yield 3.432% and the 30-year note down 31/32 to yield 4.526%.

Gold futures leapt closer to the $1,500 level. The April contract vaulted to a record $1,496.40 per troy ounce, while June-delivery gold hit $1,498.00 per troy ounce.

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2 responses »

    • We surely don’t want central planning as it used to be in the old Soviet Union; but yes, those making macro decisions in this country are leading us into what you describe. Ben Bernanke with his QE2 and like actions will have to lead to hyperinflation eventually and couple that with what Obama is spending literally assures it.

      What I am even more afraid is that we may be heading for stagflation like what happened during the 70’s. If S&P really downgrade the USA’s credit rating, it’ll make a joke of the oft quoted “full faith and credit of the USA,” interest rates will have to necessarily soar and our debt service charges will go up thereby deepening the budget crisis.

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