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Banking industry

Market Plunges Amid S&P Downgrade, Company-specific News

Strategic Insights

— 2 min read

The US stock market began the trading day under pressure, with all major indices in the red, after Standard & Poor's downgraded the US credit rating over the weekend. The downgrade, which was anticipated by many, occurred as the market was still reeling from the news. Additionally, a string of company-specific news and downgrades across various sectors, including energy, finance, and technology, added to the negative sentiment. As a result, the NYSE, DJIA, S&P 500, and Nasdaq composite indexes all declined significantly, with the Nasdaq composite leading the way down 3.89%.

Key Takeaways:

  • The Dow Jones Industrial Average (DJIA) declined 308.19 points or 2.69% to 11,136.42, marking its lowest level since August 2009.
  • The S&P 500 index dropped 39.32 points or 3.28% to 1,160.02, closing below its 200-day moving average.
  • The NASDAQ composite index plummeted 88.08 points or 3.48% to 2,444.32, led by a 26.1% surge in BSFT (Virident Systems).
  • The energy sector was particularly hard hit, with the NYSE Energy index down 4.12% to 11,610.44.
  • Bank of America (BAC) was down after facing more legal problems over its mortgage operations, with AIG filing a suit alleging "massive fraud" on soured mortgage debt.
  • Teva Pharmaceutical Industries (TEVA) was down after being sued by a joint venture of GlaxoSmithKline Plc (GSK) and Pfizer Inc. (PFE) for infringing a U.S. patent for the HIV drug Epzicom.
  • News Corp. was facing a new probe into the use of drones to gather news at its U.S.-based publication The Daily.
  • L-3 Communications (LLL) dipped after Bloomberg reported that Relational Investors LLC cut its stake in the company to 3.7% from 6%.
  • Merck (MRK) was down after theflyonthewall.com reported that the Department of Justice issued a subpoena requesting information related to the company's marketing and selling activities.
  • Best Buy (BBY) was down after Barron's said the shares may slide if management can't figure ways to retake market share from online competitors.

Statistics:

  • The NYSE composite index down 263.97 points or 3.56% to 7,155.10.
  • The S&P 500 index down 39.32 points or 3.28% to 1,160.02.
  • The NASDAQ composite index down 88.08 points or 3.48% to 2,444.32.
  • The DJIA down 308.19 points or 2.69% to 11,136.42.
  • Bank of America (BAC) down 5.7%.
  • Teva Pharmaceutical Industries (TEVA) down 2.5%.
  • News Corp. down 1.3%.
  • L-3 Communications (LLL) down 0.9%.
  • Merck (MRK) down 1.2%.
  • Best Buy (BBY) down 2.1%.

Sources:

  • AP: "S&P downgrades 32 banks, credit unions after U.S. credit rating cut"
  • Bloomberg: "L-3 Communications Falls After Relational Investors Sells Stake"
  • Theflyonthewall.com: "Merck Gets DOJ Subpoena Over Marketing Activities"
  • Reuters: "Cisco Systems to Report Q4 Earnings on Wednesday"

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