It was largely anticipated that the financial markets would take a beating after the first downgrade of U.S. debt in more than 70 years.
That’s exactly what happened.
The Dow Jones Industrial Average, S&P 500 and NASDAQ all tumbled more than 5% as Wall Street reacted to Standard and Poor’s downgrade of U.S. credit and to other warning signs in a sputtering world economy. The blue-chip Dow Jones fell 635 points, its worst one-day drop since December 2008.
Treasuries and gold prices both reached record levels as investors looked for safe havens from equity positions.
“If you’re an investor and you say ‘I’m worried about what’s going on in the world, I’m worried about liquidity and safety,’ you basically have no place to go other than the Treasury market,” Nick Sargen, chief investment officer at Cincinnati-based Fort Washington Investment Advisors told Bloomberg News. "You don’t want to catch a falling knife. But if we see value, we might be using this as an opportunity to add to specific positions.”
Tomorrow and future days could be worse for awhile. S&P is expected to release additional reports this week on asset classes affected by the U.S. credit downgrade, such as municipal bonds, setting up opportunities for more stock market volatility.
While the credit downgrade was certainly a reaction to the looming economic albatross of U.S government debt, it was also a statement to political leaders to find a fix.
Last week’s budget-debt deal did little to sway Standard and Poor’s, which had called for nearly $4 trillion in debt reduction during the next decade to shore up government finances.
Today, Obama administration officials continued to push back on the credit rating downgrade. Calling the nation’s fiscal problems "imminently solvable," President Obama said Washington must gain "a renewed sense of urgency" to tackle deficit and debt reduction.
He advocated previous positions of spending cuts in defense and domestic spending combined with tax reform. Obama also pressed Congress to extend the payroll tax cut and unemployment insurance in the short-run.
The stock market’s downward trajectory today affected Arkansas stocks. The 15 largest publicly-traded companies headquartered in state all lost ground.
Of the Arkansas stocks, Little Rock-based Dillard’s (NYSE: DDS) took the biggest hit, falling from a Friday close of $52.39 to a Monday close of $46.22, down 11.78%. The smallest decline was with the thinly traded shares of Tontitown-based P.A.M. Transportation. Shares of the trucking company fell just 2 cents from a Friday close of $9.33 to a Monday close of $9.31.
Wal-Mart shares — Arkansas’ heavyweight and one of the nation’s most closely watched stocks — fell from a Friday close of $50.85 to a Monday close of $48.92.
America’s Car Mart
Arkansas Best Corp.
Bank of the Ozarks
J.B. Hunt Transport
Simmons First National
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