US stocks plunged in one of the worst panic-sell offs since 2008 as Wall Street got its chance to react to Friday’s downgrade of the US’s credit rating.
The Dow Jones plummeted 5.6 percent on added fears that the US is headed for recession.
Analysts believe further austerity measures, which will be needed to tackle high levels of debt could stifle an already weak economic recovery.
Alan Valdez, Director of Floor Trading, appeared to be pragmatic: “We were expecting a sell-off this morning, because we were watching the Asian markets last night and then the European markets this morning. So we were really set up for the sell-off, it didn’t catch us by surprise. It was a little more violent that we thought but basically the first thirty seconds we knew, the first thirty seconds the markets were down a hundred points so we knew that the markets was going to trend down.”
Much criticism has been levelled at Standard and Poor’s unprecedented move to cut the US’s pristine triple-A credit rating.
Trader Mark Marra blamed Standard and Poor’s: “I blame the S&P, again that was a terrible thing and a very poor judgement what they did by downgrading. And when you look at their track record beginning with their mortgage backed securities and how that gave them triple A ratings, I think that’s not a source that should move anything. Actually they should move themselves out of the way.”
The worsening market turmoil puts significant pressure on the US Federal Reserve at its regular policy meeting today to announce some fresh measures of support for a damaged US economy.