Stocks: Monday's review
09.08.2011, 07:17

Stocks: Monday's review

Japanese stocks dropped, sending the Nikkei 225 (NKY) Stock Average to its biggest two-day decline since March, after Standard & Poor’s Ratings Services cut the U.S. government’s credit rating, damping the outlook for Asia’s banks and exporters.
Mitsubishi UFJ Financial Group Inc. (8306), a large holder of U.S. bonds, slid 2.6 percent. Sony Corp. (6758), a maker of consumer electronics that gets about 40 percent of its revenue from the U.S. and Europe, sank 3.8 percent. Nissan Motor Co., Japan’s No. 3 carmaker by market value, lost 2.7 percent after the dollar weakened, cutting the earnings prospect for the exporter.The Nikkei 225 fell 2.2 percent to 9,097.56 at the 3 p.m. close in Tokyo, extending losses even after the Group of Seven nations said in a statement they would take action to support markets. Only three stocks gained today on the 225-member gauge. The broader Topix lost 2.3 percent to 782.86.
European stocks dropped for a seventh day to their lowest level since August 2009 as Standard & Poor’s downgrade of U.S. sovereign debt overshadowed the European Central Bank’s purchase of Spanish and Italian government bonds.
Mining companies, carmakers and technology firms paced the selloff amid concern that the lowering of America’s credit rating will exacerbate the economic slowdown. Spanish lenders retreated even after the ECB was said to buy the country’s government bonds in a bid to tame the region’s debt crisis.National benchmark indexes retreated in all 18 western European markets. France’s CAC 40 Index (CAC) dropped 4.7 percent, Germany’s DAX Index (DAX) declined 5 percent and the U.K.’s FTSE 100 Index slid 3.4 percent. Spain’s IBEX 35 Index and Italy’s FTSE MIB Index lost 2.4 percent. Both gauges jumped more than 4 percent earlier today.
U.S. stocks tumbled, extending the biggest slump for the Standard & Poor’s 500 Index since 2008’s bear market, amid concern that a downgrade of the nation’s credit rating by S&P may worsen an economic slowdown.
The 10 groups in the S&P 500 fell more than 2.7 percent. Bank of America Corp. (BAC) tumbled 18 percent to lead financial shares in the S&P 500 down 8.4 percent. Ford Motor Co. (F) and Caterpillar Inc. (CAT) slumped at least 7.4 percent, pacing losses in stocks most-tied to the economy. Chevron Corp. (CVX) fell 6.3 percent as oil sank to an eight-month low. Newmont Mining Corp. (NEM) rose 0.6 percent after gold climbed to a record.
S&P lowered the U.S. long-term rating one level to AA+ after markets closed on Aug. 5, while keeping the outlook at “negative” as the company becomes less confident that Congress will end Bush-era tax cuts or tackle entitlements. S&P also said the U.S. rating may be reduced to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt.
Equities extended losses today as S&P also lowered credit ratings on Fannie Mae, Freddie Mac and other lenders with a “direct reliance on the U.S. government,” spurring concern over the ripple effects of the loss of America’s AAA rating.

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