Jobless rate decline stirs Wall Street; U.S. credit rating drops
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The national unemployment report showing an increase of 117,000 jobs in July looked good enough at first glance for the Dow Jones industrial average to shoot up 171 points when the markets opened Friday.
Almost as quickly, the Dow went into a dive, erasing the gains and dropping 243.34 points from Thursday's close. By midafternoon it looked as if there should be a doctor over it, holding shock paddles and shouting "Clear!"
After all the volatility, the markets closed mixed, with the Dow up 0.54 percent at 11,444.61 with a gain of 60.93 points. The Nasdaq and Standard & Poor's 500 both ended down. The Nasdaq dropped 0.94 percent, losing 23.98 points to close at 2,532.41, while the S&P 500 dipped 0.06 percent, losing just 0.69 points to close at 1,199.38.
In addition, the United States had its AAA credit rating downgraded for the first time Friday by Standard & Poor's on concern spending cuts agreed on by lawmakers to raise the nation's borrowing limit wouldn't be enough to reduce record deficits.
S&P dropped the ranking one level to AA+, after warning on July 14 that it would reduce the rating in the absence of a "credible" plan to lower deficits even if the nation's $14.3 trillion debt limit was lifted. The United States was awarded the top credit ranking by New York-based S&P in 1941. It kept the outlook at "negative."
"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.
The action could still hurt the U.S. economy over time by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on Treasuries. JPMorgan Chase estimated that a downgrade would raise the nation's borrowing costs by $100 billion a year.
First Published August 6, 2011 12:00 am
