This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Stocks Drop 1% on S&P's U.S. Outlook

NEW YORK ( TheStreet) -- Stocks shed more than 1% Monday after Standard & Poor's lowered its ratings outlook for the U.S. to negative from stable.

The Dow Jones Industrial Average dropped 140 points, or 1.1%, to close at 12,201 after dropping by more than 2% earlier in the session to a low of 12,093. The S&P 500 finished lower by 14 points, or 1.1%, to close at 1,305, and the Nasdaq declined by 29 points, or 1.1%, at 2,735.

On the Dow, Caterpillar (CAT), Bank of America (BAC), Alcoa (AA) and DuPont (DD) were the biggest laggards. Boeing (BA) was the only Dow component that closed in positive territory. Johnson & Johnson (JNJ - Get Report) saw a modest drop after trading higher earlier in the session. Earlier, medical device company Synthes confirmed that it is talking with J&J regarding a possible business combination .

Citigroup (C - Get Report) topped Wall Street's profit expectations by a penny with earnings of 10 cents a share but first-quarter revenue of $19.7 billion fell short of the $20.55 billion that analysts had been projecting. The stock finished flat at $4.42.

The market reeled after Standard & Poor's downgraded its long-term rating outlook on U.S. sovereign debt on concerns about the country's mounting budget deficits . The ratings agency maintained its triple-A rating for the U.S. but said, "We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium and long-term budgetary challenges by 2013."

"I think this just brings home the realization of something that everyone has known: the deficit has to be addressed. It has to be addressed quickly and it has to be addressed forcefully," said Quincy Krosby, a market strategist at Prudential Financial. "If it isn't dealt with, then the U.S. will get an actual downgrade, which means that the cost of capital will keep rising -- particularly for the U.S. government. The collateral damage of that will be a weaker overall economy."

Tim Speiss, vice president of EisnerAmper Wealth Planning, believes the market will bounce back from today's losses as the rating on U.S. debt is still unchanged. "The horse is not yet out of the barn," said Speiss. "We have known about the debt problem. Now we know there is a 1 in 3 chance of a downgrade in 2013. But the U.S. still has levers to cause that not to happen."

The threat of a downgrade might spur the government to work towards getting the country's deficit under control, according to the analyst. However, he said that austerity measures could impact sectors that are dependent on government spending, such as healthcare and public works projects, which means investors need to be more cautious when it comes to investing in certain sectors.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
C $52.42 0.00%
CVX $106.68 0.00%
JNJ $102.51 0.00%
XOM $88.54 0.00%
AAPL $128.46 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs