Global Markets Plunge Amid US Credit Rating Downgrade

Strategic Insights -

Concerns over the US credit rating downgrade and eurozone debt contagion sent stock markets around the world into a tailspin, with the Dow Jones Industrial Average plummeting 4.5 percent and the S&P 500 losing 5.7 percent. Despite President Obama's reassurances, the global economic uncertainty triggered a massive sell-off, with major banks, basic materials, and energy companies suffering significant losses.

Key Takeaways:

  • The Dow Jones Industrial Average fell 334.68 points (2.9 percent) to 11,109.93, while the S&P 500 dropped 45.64 points (3.8 percent) to 1,153.74.
  • The tech-heavy Nasdaq Composite plunged 100.11 points (4.0 percent) to 2,432.30, with Citigroup, Goldman Sachs, and JPMorgan Chase shedding 9.6 percent, 5.8 percent, and 5.8 percent respectively.
  • Bank of America plummeted 15.9 percent after being hit with a $10.5 billion fraud lawsuit from AIG, while aluminum giant Alcoa dropped 6.8 percent and oil major ExxonMobil fell 3.0 percent.
  • Global markets fell on fears of uncertainty, with London closing 3.4 percent lower, Paris down 4.7 percent, and Frankfurt slumping 5 percent.
  • Even before the downgrade, stock markets had plunged last week on concerns that growth in the US was slowing and the world's largest economy might be on the brink of a double-dip recession.
  • The European Central Bank signaled late Sunday that it would make major purchases of eurozone government bonds, which market sources indicated included Italy and Spain.

Statistics:

  • Dow Jones Industrial Average: fell 334.68 points (2.9 percent) to 11,109.93
  • S&P 500: dropped 45.64 points (3.8 percent) to 1,153.74
  • Nasdaq Composite: plunged 100.11 points (4.0 percent) to 2,432.30
  • US Treasury yield on 10-year bond: fell to 2.38 percent from 2.56 percent late Friday
  • US Treasury yield on 30-year bond: fell to 3.71 percent from 3.82 percent late Friday
  • Gold: traded for $1,709.68 per troy ounce on the spot market in New York, after earlier hitting a new intraday high of $1,715.75

Sources:

  • "US Stocks Fall Sharply, Treasury Prices Rise" by Bloomberg
  • "S&P 500 Plunges 5.7 Percent, Dow Jones Falls 4.5 Percent" by CNBC
  • "Global Markets Fall on Fears of Uncertainty" by Reuters
  • "US Credit Rating Downgrade Triggers Global Sell-Off" by The Wall Street Journal