U.S. Stocks Fall On Downgrade Of U.S. Credit

U.S. markets have opened for the first time since Standard and Poor's downgraded the nation's credit rating. The Dow Jones industrial average fell more than 250 points minutes after the opening bell on Wall Street.

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RENEE MONTANGE, host:

U.S. markets have been open for about an hour now on the first trading day since Standard & Poor's downgraded the nations debt - credit, rather. And perhaps predictably, stocks are falling.

NPR's Tamara Keith has been watching the markets, and joins us now to talk about it.

And what exactly is happening with U.S. markets?

TAMARA KEITH: Well, the major indices are down in the neighbor(ph) of two-and-a-half percent at this point. Now, that's obviously not great, but it's also not a panic situation. Markets around the globe are in a similar place: down, but not drastically.

Gold prices are up and oil prices are down, indicating that investors think the economy could suffer as a result, and then cut into the demand for oil.

But, you know, it's worth noting here that we focus a lot on the markets, but the markets are not the economy. They're just one measure of how investors are feeling.

MONTAGNE: Well, let's look at another one of those measures, U.S. Treasuries. One might assume that if the credit rating of the U.S. took a hit, investors would be running away from U.S. debt. But that's not the case.

KEITH: No. Call it counterintuitive, but at the moment, the 10-year Treasury is below where it closed on Friday. And when yields go down, that means demand is up. Interest rates for things like mortgages are tied to treasuries. So the fact that investors are not fleeing is a good sign for consumers - at least so far. But, of course, it is very early.

MONTANGE: Why would investor still treasuries as a safe bet - if, in fact, that's what this is saying?

KEITH: Well, because the U.S. is - we're still the biggest game in town and the safest bet, downgrade or not. You know, Europe has these sovereign debt problems of its own, and economists say those are much more serious than what's happening here in the U.S. And also, so far, just one of the three major credit rating agencies has downgraded the U.S. from triple A.

So, as one investor put it, we used to be the cleanest shirt in the drawer. We're still the cleanest shirt in the drawer. We're just a little dirty.

MONTAGNE: And there's been a lot of a talk about possible other fallout from this downgrade by S&P. Have we seen any of these ripple effects yet?

KEITH: Yes. They've been coming down this morning, in fact. S&P has started downgrading other organizations that have connections to U.S. treasuries. They just downgraded the mortgage giants Fannie Mae and Freddie Mac.

Now, of course, Fannie and Freddie, their funding is completely tied to the U.S. Treasury. So that shouldn't be a surprise. They've also announced the downgrade of several companies that work with U.S. treasuries, including the Fixed Income Clearing Corporation and the Depository Trust Company. And they can - they tell us that we can expect more of these types of rating changes to come down today, and in the days to come.

MONTAGNE: And, of course, we'll be following this story on NPR News all morning and all day long. Thank you, Tamara.

KEITH: Thank you, Renee.

MONTAGNE: That's NPR's Tamara Keith.

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