Standard & Poor?s decision to cut the United States? credit rating from AAA to AA+ after markets closed destroyed markets yesterday, as was expected. Also, the European Central Bank was not able to calm markets by trying to buy Italian and Spanish public debt in order to avoid another stock market plunge and ease pressure on both countries.
European markets were down for the day, while Wall Street was flooded with numerous figures in the red at the midday mark, confirming what stock futures predicted in the first hour of trading.
Cutting the credit rating of the world?s foremost economy is for many a symptom of a possible recession. Stock markets in Europe spread their pessimism to America, and futures indexes registered drops greater than 2% in the morning. These drops were confirmed with the first trades in New York. The Dow Jones dropped 1.5% and settled at 11,272 points minutes after trading began, and the negative direction worsened as the day went on. The Dow Jones had lost 2.8% by midday, in part because Bank of America?s shares lost 15%. The S&P 500 and NASDAQ have experienced three straight sessions in the red, and today?s losses were around 3.5%.
Expected or not, justified or not, the reality is that the judgment from Standard & Poor?s spread fear across Europe. So much so that the European Central Bank called an urgent meeting on Sunday in order to draw measures that would slow the bloodletting that several Eurozone countries are experiencing, principally Spain and Italy. Debt sales in these countries will mitigate the sovereign debt crisis and prevent new victims, and the Spanish and Italian stock markets regained 4% and 5% respectively during the trading day, ending at 9,030 and 16,799 points. Still, despite the gasp of fresh air that the ECB has provided, the Ibex 35 and Tse Mib are struggling to breathe easily.
