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

Photogallery Americans Celebrate Thanksgiving With Feasts, Festivities

Holiday traditions include turkey dinners, 'turkey trots,' American-style football and New York parade with giant balloons More

Video For Obama, Ferguson Violence is a Personal Issue

With two years left in term, analysts say, president has less to lose by taking conversation on race further More

Video Italian Espresso Expands Into Space

When Italian astronaut Samantha Cristoforetti headed for the ISS, her countrymen worried how she would survive six months drinking only instant coffee 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.
South Africa Sees Male Circumcision as Way to Reduce HIV Infectionsi
X
November 28, 2014 3:31 PM
South Africa remains plagued by AIDS despite massive government and NGO efforts on prevention and life-sustaining Anti-Retro-Viral programs. But the country has opened up another front to reduce new HIV infections: promoting circumcision. Emilie Iob reports for VOA News from a pioneering circumcision center in Orange Farm, Johannesburg.
Video

Video South Africa Sees Male Circumcision as Way to Reduce HIV Infections

South Africa remains plagued by AIDS despite massive government and NGO efforts on prevention and life-sustaining Anti-Retro-Viral programs. But the country has opened up another front to reduce new HIV infections: promoting circumcision. Emilie Iob reports for VOA News from a pioneering circumcision center in Orange Farm, Johannesburg.
Video

Video To Make A Living, Nairobi Street Vendors Face Legal Hurdles, Physical Violence

The Nairobi City Council has been accused of brutality in dealing with hawkers in the Central Business District - in order to stop them from illegally selling their wares on the streets. Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video For Obama, Ferguson Violence is a Personal Issue

Throughout the crisis in Ferguson, Missouri, President Barack Obama has urged calm, restraint and respect for the rule of law. But the events in Ferguson have prompted him to call — more openly than he has before — for profound changes to end the racism and distrust that he believes still exists between whites and blacks in the United States. VOA White House correspondent Luis Ramirez reports.
Video

Video Online Magazine Gets Kids Discussing Big Questions

Teen culture in America is often criticized for being superficial. But an online magazine has been encouraging some teenagers to explore deeper issues, and rewarding their efforts. VOA religion reporter Jerome Socolovsky went to this year’s Kidspirit awards ceremony in New York.
Video

Video US Community Kicks Off Thanksgiving With Parade

Thursday is Thanksgiving in the United States, a holiday whose roots go back to the country's earliest days as a British colony. One way Americans celebrate the occasion is with parades. Anush Avetisyan takes us to one such event on the day before Thanksgiving near Washington, where a community's diversity is on display. Joy Wagner narrates
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8010
JPY
USD
118.31
GBP
USD
0.6371
CAD
USD
1.1397
INR
USD
62.122

Rates may not be current.