A SHORT-NOTICE SPEECH by US president Barack Obama did little to halt one of the worst days in Wall Street’s history today, as the S&P debt downgrade sent American investors fleeing and dumping shares in enormous volumes.
When trading closed in New York at 9pm Irish time, the Dow Jones’ Industrial Average stood at 10,810.76 – losing 633.85 points, or 5.5 per cent, in its six-and-a-half-hour session. The drop is the sixth-largest in the Dow’s 115-year history.
The remarkable fall was led by the collapse in the value of Bank of America, one of the index’s 30 constituents. The aftermath of the debt downgrade, and the news that insurance conglomerate AIG is suing it for $10bn, sent the bank’s shares down by 20 per cent – wiping $16.55bn off its value.
The day was even worse for other indexes. The S&P 500 – considered by many to be a better, broader indication of the health of the US market – lost 6.66 per cent of its value. The tech-heavy NASDAQ composite index lost 6.9 per cent.
There were some bright spots, however: in the first day of trading after Standard & Poor’s took the unprecedented step of removing the US’s coveted AAA rating for its government bonds, the price of government borrowing actually fell significantly.
As of 9pm Irish time, the cost to the US government of a 10-year loan had fallen by 0.21 per cent, to 2.346 per cent – though the bulk of this drop had been recorded early, and before President Obama had taken to the airwaves to describe the US as “an AAA country” irrespective of the S&P downgrade.
Obama cited the advice of 80-year-old billionaire Warren Buffett who had remarked he would happily apply a AAAA rating to the US’s bonds if one had existed.
Earlier, Standard & Poor’s had followed up its downgrade of the US sovereign by cutting its credit ratings for government-backed mortgage agencies Fannie Mae and Freddie Mac, reflecting the pair’s reliance on the US government.
The savage day on Wall Street compounded an already-miserable session in Europe. By its close, the FTSE 100 index in London had created a new record of its own: by losing 178 points (3.4 per cent) it shed a triple-digit number for the fourth day in a row, an ignominious feat never achieved before.
The CAC 40 in Paris shed 4.7 per cent, while in Frankfurt the DAX lost over 5 per cent.
In Dublin, the ISEQ index of Irish shares shed 4.4 per cent, with five shares losing over 10 per cent: Independent News & Media, Dragon Oil, First Derivative, Merrion Pharmaceutical and Petroceltic International, which fell by over 21 per cent.
To embed this post, copy the code below on your site
have your say