S&P Index Drops 2%, U.S. Risks AAA Rating Downgrade

Bikram Pandey
27 Jul, 2011
New York City

U.S. stocks declined sharply as the debt impasse continues and House Speaker John Boehner struggles to gain support of the Republic Party members for his plan. The U.S. debt rating could be lowered by at least one rating agency.

[R]4:10 PM New York – U.S. stocks declined sharply as the debt impasse continues and House Speaker John Boehner struggles to gain support of the Republic Party members for his plan. The U.S. debt rating could be lowered by at least one rating agency.[/R]

U.S. stocks declined as markets finally began to digest the possible negative ramification of the failure to increase debt ceiling by the August 2 deadline. The indexes accelerated the decline in the late morning and dragged markets lower in Europe.

Amazon sales soared 51% and second quarter net decreased 8% to $191 million on higher expenses and Boeing lifted its earnings outlook. Aetna second quarter net income increased 9% to $536 million. ConocoPhillips quarterly net income declined to $3.4 billion. Boeing second quarter net income increased 20% to $941 million.

European markets turned lower after bank lending in the euro-zone rose at a slower pace in June. Swiss leading indicator index declined for the third month in a row and Italian manufacturing index weakened. SAP AG gained after it reported a strong quarter and Peugeot Citroen declined on profit warnings.

Stocks in Japan declined after positive earnings were overshadowed by the rising debt tensions in the U.S. Fanuc Ltd reported higher earnings and lifted its current quarter view. The leasing company Orix also reported 44% increase in net. The dollar declined below 78 yen mark.

Australian stocks declined after inflation accelerated in the second quarter. Food and household services prices increase lifted inflation in the second quarter to 0.9% from the first quarter and rose 3.6% on an annual basis. Banks and steelmakers declined after the Australian dollar rose to a record high of $1.10.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield increased to 2.98% and 30-year U.S. bond closed unchanged at 4.28%.

The U.S. dollar increased at $1.435 to one euro and fell against the Japanese yen to 78.03 yen.

Immediate delivery futures of Texas crude oil decreased $2.15 to $97.44 a barrel and futures of natural gas decreased 0.01 cents to $4.37 per mbtu and gasoline price decreased 0.37 cents to 314.99 cents a gallon.

In metals trading, copper decreased 3.85 cents to $4.44 per pound, gold fell $2.40 to $1,616.90 per ounce and silver decreased $0.31 to $40.38.