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Dow plummets 600 points over US credit rating downgrade

New York: Wall Street reflected widespread anxiety over the US economy’s health, with the Dow Jones industrial average plummeting over 600 points on the week’s first trading day after Standard and Poor’s unprecedented downgrade of the US credit rating.

The Dow Jones, driven by a day of sell-offs, finished Monday down 634.76 points or 5.5 per cent at 10809.85.

It ended below the 11,000 mark in the sharpest one-day decline since the financial crisis of 2008.

The broader Standard & Poor’s 500 index fell even more sharply and was down 79.83 points or 6.6 per cent at 1119.55.

The Nasdaq composite index tumbled 174.72 points, or 6.9 per cent. The Dow now is down 15.6 per cent from its April high and 6.6 per cent for the year.

At the start of trading day, investors and economists were awaiting reaction of the markets to Friday’s news that S&P’s has downgraded the US government’s credit rating by a notch to ‘AAplus’ from the top tier ‘AAA’.

In his first public statement since the S&P’s downgrade, President Barack Obama sought to calm sentiments saying the US will always remain a ‘AAA’ country.

“Markets will rise and fall,” he said in a televised address.

“But this is the United States of America. No matter what some agency may say, we have always been and always will be a triple-A country.”

He said “our problems are eminently solvable and we know what we need to do to solve them” adding that the ratings downgrade should add a “renewed sense of urgency” for Democrats and Republicans to tackle the debt and deficit crisis.

The mayhem in the stock markets was reminiscent of the 2008 financial crisis with worry setting in among investors that America may be headed for a double-dip recession.

Investors took refuge in traditional safe bets like gold, currencies of safe-seeming countries as well as US Treasury bonds.

The stock selling impacted almost every segment of the market.

All 500 stocks in the S&P 500-stock index as well as the 30 stocks in the Dow industrials declined.

Bank stocks witnessed the biggest declines.

Bank of America fell 20 per cent, Citigroup 16 per cent, Morgan Stanley 14 per cent, JPMorgan 9 per cent and Goldman Sachs six per cent.

There was little good news to cheer market sentiment with Standard & Poor’s downgrading a variety of financing entities backed by the federal government, including housing giants Fannie Mae and Freddie Mac earlier in the day.

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