News / Economy

Investors in US Financial Markets Dump Stocks, Buy Treasuries

Traders work on the floor of the New York Stock Exchange on Monday, Aug. 8, 2011
Traders work on the floor of the New York Stock Exchange on Monday, Aug. 8, 2011
Peter Fedynsky

The downgrading of U.S. creditworthiness by the Standard & Poor's rating agency late last week triggered the worst losses on U.S. financial markets Monday since the 2008 global economic crisis.  But, investors still consider U.S. government securities to be among the world’s safest investments.

The Dow Jones Industrial Average fell below 11,000, dropping more than 630 points - about 5.5 percent on Monday.  The Standard and Poor's 500 slid 6.7 percent, with every stock listed on the index ending the day in negative territory.  The technology-heavy NASDAQ index was down 6.9 percent.  

Doug Roberts, chief investment strategist for Channel Capital Research, attributes the sell-off to the loss of America’s highly regarded AAA bond rating.

“Right now, we saw basically the aftermath of the S&P downgrade and that put in a great deal of fear in the market and you saw the sell-off that results," said Roberts.

S&P lists 5 pillars in its Sovereign Rating Framework as:

  • Institutional effectiveness and political risks, reflected in the political score
  • Economic structure and growth prospects, reflected in the economic score
  • External liquidity and international investment position, reflected in the external score
  • Fiscal performance and flexibility, as well as debt burden, reflected in the fiscal score
  • Monetary flexibility, reflected in the monetary score

    (Source: Standard & Poor's Sovereign Rating Framework)

The price of gold reached a record high on Monday - more than $1,700 per ounce - as investors dumped stocks and sought safe haven in the precious metal.  They also shifted money into U.S. government securities.

Peter Cardillo, chief market analyst with Rockwell Global Capital, notes the irony:

“People are not really afraid that the United States is not creditworthy," said Cardillo. "And as a result of that, they poured in - both foreigners and domestic investors - poured into the Treasury market.”

Cardillo says the fundamentals of the U.S. economy are strong and that the steep decline in U.S. stock prices during the past two weeks is a market correction, not a crash.  He says the U.S. debt downgrade is a warning to American politicians.

“It sent a loud message to the politicians that gridlock should not continue and that they need to get their political aspirations put on the side, and they need to work a deficit reduction plan that will satisfy the ratings agencies, and, of course, will satisfy the markets in general," he said.

Analyst Doug Roberts says it is critical that Tuesday’s Federal Reserve meeting address short-term stock market volatility.  He says fixing the problem over the long-run will involve painful reforms.  

“There’s a huge amount of credit that was built up in the private sector that’s now being supported by an increase in the debt in the public sector, and until we look at some fundamental reforms to deal with this, which will be painful, this is likely to continue," he said.

Analyst Peter Cardillo says the fact that the market did not bounce up at the end of the day might indicate more declines on Tuesday.

Related video by Mil Arcega:

You May Like

Video In Ukraine's Nikishino, No House Untouched by Fighting

Ninety percent of homes in one small village were damaged or destroyed as government forces failed to stop a rebel advance More

Pakistan’s 'Last Self-Declared Jew' Attacked, Detained

Argument about the rights of non-Muslims in Pakistan allegedly results in mob beating well-known Jewish Pakistani More

Turkey Cracks Down on Political Dissent — Again

People daring to engage in political dissent ahead of upcoming general elections could find themselves in jail More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
In Their Own Words: Citizens of Kobanii
X
Mahmoud Bali
March 06, 2015 8:43 PM
Civilians are slowly returning to Kobani, after Kurdish fighters backed by coalition airstrikes fought off a four-month siege of the northern Syrian town by Islamic State militants. VOA Kurdish Service reporter Mahmoud Bali talked to some of those who have returned. We hear about the devastation of Kobani through their own words.
Video

Video In Their Own Words: Citizens of Kobani

Civilians are slowly returning to Kobani, after Kurdish fighters backed by coalition airstrikes fought off a four-month siege of the northern Syrian town by Islamic State militants. VOA Kurdish Service reporter Mahmoud Bali talked to some of those who have returned. We hear about the devastation of Kobani through their own words.
Video

Video In Ukraine's Nikishino, No House Untouched by Fighting

In the village of Nikishino, in eastern Ukraine, recent fighting has brought utter devastation. Ninety percent of the houses are damaged or destroyed after government forces tried and failed to stop rebels advancing on the strategically important town of Debaltseve nearby. Patrick Wells reports for VOA from Nikishino.
Video

Video Crime Scenes Re-Created in 3-D Visualization

Police and prosecutors sometimes resort to re-creations of crime scenes in order to better understand the interaction of all participants in complicated cases. A Swiss institute says advanced virtual reality technology can be used for quality re-creations of events at the moment of the crime. VOA’s George Putic reports.
Video

Video Sierra Leone Ebola Orphans Face Another Crisis

There's growing concern about the future of an orphanage run by a British charity in Sierra Leone, after a staff member and his wife died this week from Ebola. The Saint George Foundation Orphanage in Freetown is now in quarantine, with more than 20 children and seven staff in lock-down. The BBC has agreed to share Ebola-related material with Voice of America because of the difficulties faced by media organizations reporting the crisis. Clive Myrie reports from Sierra Leone.
Video

Video Growing Concerns Over Whether Myanmar’s Next Elections Will Be Fair

Myanmar has scheduled national elections for November that are also expected to include a landmark referendum on the country's constitution. But there are growing concerns over whether the government is taking the necessary steps to prepare for a free and fair vote. VOA Correspondent Steve Herman was recently in Myanmar and files this report from our Southeast Asia bureau in Bangkok.
Video

Video Nigeria’s Ogonis Divided Over Resuming Oil Production

More than two decades ago, Nigeria’s Ogoni people forced Shell oil company to cease drilling on their land, saying it was polluting the environment. Now, some Ogonis say it’s time for the oil to flow once again. Chris Stein reports from Kegbara Dere, Nigeria.
Video

Video Fuel Shortages in Nigeria Threaten Election Campaigns

Nigeria is suffering a gas shortage as the falling oil price has affected the country’s ability to import and distribute refined fuels. Coming just weeks before scheduled March 28 elections, the shortage could have a big impact on the campaign, as Henry Ridgwell reports for VOA.
Video

Video Report: Human Rights in Annexed Crimea Deteriorating

A new report by Freedom House and the Atlantic Council of the United States says the human rights situation in Crimea has deteriorated since the peninsula was annexed by Russia in March of last year. The report says the new authorities in Crimea are discriminating against minorities, suppressing freedom of expression, and forcing residents to assume Russian citizenship or leave. Zlatica Hoke has more.
Video

Video 50 Years Later African-Americans See New Voting Rights Battles Ahead

Thousands of people will gather to mark the 50th anniversary of a historic civil rights march on March 7th in Selma, Alabama. In 1965, dozens of people were seriously injured during the event known as “Bloody Sunday,” after police attacked African-American demonstrators demanding voting rights. VOA’s Chris Simkins introduces us to some civil rights pioneers who are still fighting for voting rights in Alabama more than 50 years later.
Video

Video Craft Brewers Taking Hold in US Beer Market

Since the 1950’s, the U.S. beer industry has been dominated by a handful of huge breweries. But in recent years, the rapid rise of small craft breweries has changed the American market and, arguably, the way people drink beer. VOA’s Jeff Custer reports.
Video

Video Video Claims to Show Shia Forces in Iraq Executing Sunni Boy

A graphic mobile phone video is spreading on the Internet, claiming to show Iraqi forces or Shia militia executing a handcuffed Sunni boy. Experts have yet to verify the video, but already Islamic State followers are publicizing it across social media, playing on deep-rooted sectarian fears. VOA’s Jeff Seldin reports.
Video

Video Ukrainian Authorities Struggle to Secure a Divided Mariupol

Since last month's cease-fire went into effect, shelling around the port city of Mariupol has decreased, but it is thought pro-Russian separatists remain poised to attack. For the city’s authorities, a major challenge is gaining the trust of residents, while at the same time rooting out informants who are passing sensitive information to the rebels. Patrick Wells reports for VOA.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.9034
JPY
USD
120.24
GBP
USD
0.6550
CAD
USD
1.2440
INR
USD
62.254

Rates may not be current.