Monday, April 18, 2011

S&P lowers outlook on US debt; financial markets plunge

The United States on Monday was warned that it could lose its coveted status as the world’s most secure economy if lawmakers don’t rein in the nation’s debt, pushing U.S. financial markets down.

The ratings agency Standard & Poor’s issued a “negative” outlook on the United States, sending a shot across the bow of Washington politicians in the midst of a contentious debate over how to curtail the nearly $14.3 trillion debt.

Stock prices immediately fell and the dollar dropped against competing currencies before stabilizing late in the morning. The yields on long-term Treasury bonds spiked, indicating that people loaning the U.S. government money wanted more of a return to offset the risk of extending credit to the United States.

“We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium-and long-term budgetary challenges by 2013,” S&P one of the nation’s three major credit-rating agencies, said in a report.

S&P added: “If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.”
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1 comment:

Bill@ etf trend trading review said...

Hi, great post. And it is really troubling news for the US economy. Even if the rating is not in effect yet, it is making big news.