NEW YORK (CBS/AP) – The U.S. stock market joined a sell-off around the world Monday in the first trading since Standard & Poor’s downgraded American debt.
The Dow Jones Industrial Average closed down 634 points Monday and fell below 11,000 for the first time since November. The sharp drop extended Wall Street’s almost uninterrupted decline since late July, when the Dow was flirting with 13,000.
Treasury prices rose – despite S&P’s assessment that they were a riskier investment than the debt of some other countries like Canada and France. Investors still view Treasurys as one of the world’s few safe havens from turmoil in other financial markets like stocks or commodities.
With the U.S. economy in crisis exchanges in Asia, Australia, and New Zealand fell several points after opening Monday morning.
Speaking at the White House on the Standard & Poor’s downgrade, President Barack Obama renewed a plea to Congress to take action in September of help create jobs and cushion Americans from a still weak economy.
Obama said financial markets around the world “still believe our credit is triple A. I and the world’s investor’s agree.
For the first time in history, Standard and Poor’s announced late Friday that it downgraded the U.S. triple A credit rating forcing banks to staff trading desks over the weekend and sent the White House into a full court press to calm nerves.
The credit agency blamed the move on the debt ceiling deal saying it didn’t go far enough to get the nation’s finances in order.
The news came at the end of a rollercoaster week for the economy which followed the debt ceiling vote, the Dow’s biggest single drop since the height of the economic crisis in 2008, and unemployment dipping to 9.1 percent.
The U.S. stock market has lost well over a trillion dollars in value over the past 11 trading days.
Investors worry the debt downgrade could put the brakes on an already slowing economy because it will most likely result in higher interest rates for businesses and consumers — something traders say is the last thing a fragile economy needs.
Investors continue to flock to the safety of gold — the precious metal blasted through $1,700 an ounce to an all-time high.
S&P added insult to injury Monday morning, downgrading Fannie Mae and Freddie Mac’s debt. The ratings agency is warning if Congress can’t cut America’s debt bill further, another downgrade could be on the way this fall.
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