Stock Markets Down In Reaction to S&P Downgrade of U.S. Bond Rating

By Chuck Sudo in News on Aug 8, 2011 4:24PM

The stock markets are reacting to Friday's downgrading of the U.S. credit rating by selling off stock. Stocks are down sharply so far during trading this morning, although CBOE's Volatility Index shows signs that the early morning drops are starting to climb back up.

Standard & Poors, whose announcement caused this, said the decision was based on the damage done to the U.S. reputation over the controversy surrounding the debt ceiling and concerns that underlying public finances are on an unsustainable path. S&P managing director David Beers said he had no second thoughts on the downgrade and doesn't believe it would be catastrophic for the nation's credit worthiness and that it's unlikely the U.S. will return to a AAA rating anytime soon.

S&P also downgraded the ratings for Fannie Mae and Freddie Mac this morning, which could have further ramifications on trading. Meanwhile, the men and women in Washington who helped bring on this mess are playing the blame game. The GOP is blaming President Obama while David Axelrod blames the Tea Party rhetoric. the Tea Party, meanwhile, is cheering the downgrade, at least as indicated in this video from a Tea Party Express stop in Fond du Lac, WI yesterday.