U.S. Stocks Tumble After S&P Reduces Country's Long-Term Credit Outlook - Bloomberg

U.S. stocks slumped, sending benchmark indexes to their biggest declines in a month, after Standard & Poor’s Ratings Service cut the nation’s long-term credit outlook to negative.

Caterpillar Inc. (CAT) and United Technologies Corp. (UTX) sank at least 2.1 percent to help pace the declines in the Dow Jones Industrial Average. The Morgan Stanley Cyclical Index dropped 1.2 percent as 26 of its 30 stocks tumbled. Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) dropped more than 1.4 percent amid concern that China’s efforts to cool inflation will hurt the economy.

The S&P 500 declined 1.1 percent to 1,305.14 at 4 p.m. in New York, its biggest retreat since March 16. The Dow average tumbled 140.24 points, or 1.1 percent, to 12,201.59.

“There are a lot of structural issues that need to be dealt with,” said Mike Ryan, the New York-based chief investment strategist for Wealth Management Americas at UBS Financial Services Inc., which oversees $741 billion. “Anytime you see anything that suggests that the rating could be subject to downgrade, it’s perceived negatively. If this were to raise funding costs for the government, then it would weigh on economic prospects. It’s clearly not positive for companies.”

The S&P 500 had rallied 4.9 percent this year through April 15 amid higher-than-estimated corporate earnings and government stimulus measures. The Fed and U.S. agencies have lent, spent or guaranteed about $8.2 trillion to lift the economy from the worst slump since the Great Depression, according to data compiled by Bloomberg.
‘Negative’

S&P put a “negative” outlook on the U.S. AAA credit rating, assigning a one-in-three chance of a ratings cut in the next two years, because of rising budget deficits and debt. More ...