Stocks take dive in first trading since S&P's cut
Source: Agencies |
August 9, 2011, Tuesday
|
Print Edition
Print Edition
THE US stock market joined a sell-off around the world yesterday in the first trading since Standard & Poor's downgraded American debt and gave investors another reason to be anxious.
The Dow Jones industrial average fell more than 250 points minutes after the opening bell on Wall Street. It recovered some of those losses, then fell again and was down as many as 375 points in mid-morning trading. At noon, the Dow was down 289 points.
It was the first chance for global investors to respond to S&P's announcement last Friday that it was reducing its credit rating for long-term US government debt by one notch, from AAA, the highest rating, to AA+.
The move wasn't a total surprise but came when investors were already feeling nervous about a weak US economy, European debt problems and Japan's recovery from its March earthquake.
Stock markets in Asia began the global rout. European markets opened later and fell, too, with Germany down 4.4 percent and France 4 percent.
In other midday trading on Wall Street, the S&P 500 index fell 35 points, or 2.9 percent, to 1,165. The Nasdaq composite index fell 78 points, or 3.1 percent, to 2,454. The Dow was at 11,169, down 2.4 percent. The S&P 500 is already down 10 percent so far in August. If it stays down just that much, it would be the worst month for the index since February 2009.
Fresh memories of the financial crisis three years ago are also driving investors away from risky investments and into what's considered safer.
"Fear of a repeat of 2008 is what's really driving investments," said Gary Schlossberg, senior economist with Wells Capital Management.
Prices for US government debt rose - even after S&P essentially said they were a riskier investment than the debt of some other major world economies - because Treasurys are still seen as one of the world's few safe havens. Prices rise as demand increases.
The yield on the 10-year Treasury note fell much of the morning, to 2.38 percent from 2.57 percent late Friday. A bond's yield drops when its price rises. The 10-year note's yield fell as low as 2.06 percent in 2008.
Stocks in industries whose profits are most closely tied to the strength of the economy fell the most. Energy stocks in the S&P 500 fell 4.9 percent, and financial stocks fell 4.5 percent, for example.
The smallest losses came from stocks in safer industries whose profits tend to be steadier, regardless of the economy. Consumer staples stocks fell just 1.5 percent. Even in a bad economy people will still buy things like toothpaste and bread. Utilities, also considered a necessity for consumers, fell 2 percent.
Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing nations issued a statement saying they were committed to taking all necessary measures to support financial stability and growth.
The Federal Reserve will meet today, but economists don't expect much to come out of the meeting. The central bank's key interest rate is already at a record of nearly zero, where it has been since 2008. The Fed has also already said that it plans to keep rates low for "an extended period."
The Dow Jones industrial average fell more than 250 points minutes after the opening bell on Wall Street. It recovered some of those losses, then fell again and was down as many as 375 points in mid-morning trading. At noon, the Dow was down 289 points.
It was the first chance for global investors to respond to S&P's announcement last Friday that it was reducing its credit rating for long-term US government debt by one notch, from AAA, the highest rating, to AA+.
The move wasn't a total surprise but came when investors were already feeling nervous about a weak US economy, European debt problems and Japan's recovery from its March earthquake.
Stock markets in Asia began the global rout. European markets opened later and fell, too, with Germany down 4.4 percent and France 4 percent.
In other midday trading on Wall Street, the S&P 500 index fell 35 points, or 2.9 percent, to 1,165. The Nasdaq composite index fell 78 points, or 3.1 percent, to 2,454. The Dow was at 11,169, down 2.4 percent. The S&P 500 is already down 10 percent so far in August. If it stays down just that much, it would be the worst month for the index since February 2009.
Fresh memories of the financial crisis three years ago are also driving investors away from risky investments and into what's considered safer.
"Fear of a repeat of 2008 is what's really driving investments," said Gary Schlossberg, senior economist with Wells Capital Management.
Prices for US government debt rose - even after S&P essentially said they were a riskier investment than the debt of some other major world economies - because Treasurys are still seen as one of the world's few safe havens. Prices rise as demand increases.
The yield on the 10-year Treasury note fell much of the morning, to 2.38 percent from 2.57 percent late Friday. A bond's yield drops when its price rises. The 10-year note's yield fell as low as 2.06 percent in 2008.
Stocks in industries whose profits are most closely tied to the strength of the economy fell the most. Energy stocks in the S&P 500 fell 4.9 percent, and financial stocks fell 4.5 percent, for example.
The smallest losses came from stocks in safer industries whose profits tend to be steadier, regardless of the economy. Consumer staples stocks fell just 1.5 percent. Even in a bad economy people will still buy things like toothpaste and bread. Utilities, also considered a necessity for consumers, fell 2 percent.
Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing nations issued a statement saying they were committed to taking all necessary measures to support financial stability and growth.
The Federal Reserve will meet today, but economists don't expect much to come out of the meeting. The central bank's key interest rate is already at a record of nearly zero, where it has been since 2008. The Fed has also already said that it plans to keep rates low for "an extended period."
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
