Market Recap: Stocks Move Lower as S&P Downgrades France
Markets closed down on Wall Street today: Dow -0.39%, S&P -0.49%, Nasdaq -0.51%, Oil +0.16%, Gold -0.52%.
On the commodities front, Oil (NYSE:USO) climbed to $99.26 a barrel. Precious metals were down, with Gold (NYSE:GLD) falling to $1,639.10 an ounce while Silver (NYSE:SLV) fell 1.44% to settle at $29.60.
Today’s markets were down because:
1) Downgrades. Standard & Poor’s stripped France, the euro zone’s second-largest economy, of its top credit rating on Friday, lowering it by one notch to AA+, the same rating the United States has had since the ratings company downgraded its debt in August. Though S&P has not yet issued a formal statement, French Finance Minister Francois Baroin confirmed the downgrade, which leaves Germany as the only major economy in the 17-nation euro zone with an AAA credit rating. A credit downgrade threatens to increase borrowing costs for sovereigns already weighed down by heavy debt loads and stagnating growth. Earlier reports had S&P downgrading Austria as well, but so far, no other downgrades have been confirmed.
2) Trade. The U.S. trade deficit widened in November as an increase in imports weighed on economic growth, Commerce Department data showed on Friday. Imports rose 1.3 percent as exports fell 0.9 percent. But though a wider trade deficit subtracts from gross domestic product, higher imports are a sign of increased consumer demand within the country. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose in January, suggesting a stronger consumer spending outlook consistent with the growth in imports. However, as the cooling global economy causes exports to taper off, it will soon have a negative effect on the U.S. recovery.
3) Banks. JPMorgan (NYSE:JPM) led banks stocks lower, falling as much as 3 percent after the bank announced it earned just 90 cents per share in the fourth quarter, down from $1.12 a year earlier. Citigroup (NYSE:C), Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC), and Goldman Sachs (NYSE:GS) all declined around 3 percent as well, while Wells Fargo’s (NYSE:WFC), scheduled to report earnings on Tuesday, managed to close the day only slightly in the red. Citigroup is also set to report earnings next Tuesday, while Goldman will report on Wednesday and Bank of America and Morgan Stanley will report on Thursday.