Monday, August 8, 2011

Dow plunges 634 points: Markets suffer global slump after U.S. downgrade

U.S. and European markets closed sharply down Monday as investors responded to the unprecedented downgrade of U.S. debt on Friday and concerns around the ongoing eurozone crisis.

The Dow Jones industrial average plummeted more than 630 points, or 5.5%, and was pushed below 11,000 for the first time since November. The S&P 500 fell 6.6% and Nasdaq Composite was down around 6.9%.

European markets closed significantly down, with the FTSE 100 dropping by 3.39%, France's CAC index settling 4.7% lower and Germany's DAX dropping 5%.

The move from Standard & Poor's to downgrade the U.S. from AAA to AA-plus triggered heavy criticism from President Barack Obama's administration amid fears it could contribute to another recession.

Standard & Poor's John Chambers told CNN the downgrade was based on the political polarization in the U.S., following debate over raising the borrowing ceiling, and the country's high levels of debt.

Moody's, another major ratings agency, affirmed its rating of the U.S. debt at Aaa on August 2. It has said a ratings downgrade is possible before 2013 if fiscal discipline is weakened or by a significant deterioration in economic outlook. (more)