US markets suffer sharpest drop since 2008

In Wall Street’s worst day since the 2008 financial crisis, all three major US stock indexes sank between 5 percent and 7 percent as fearful investors reacted to the US losing its coveted AAA credit rating.

Despite President Barack Obama’s reassuring words that America’s “problems are eminently solvable,” and it “always will be a triple-A country”, the Dow Jones industrial average Monday fell 634 points, or 5.6 percent, pushing it below 11,000 for the first time since last November.

The Standard & Poor’s 500 -stock index dropped 6.7 percent and the Nasdaq Composite (COMP) dropped 175 points, or 6.9 percent, to 2,358.

US stocks have fallen 15 percent during the last two weeks and Monday’s sell-off was worse than the 512-point drop stocks experienced only last week.

Though observers said S&P’s downgrade shouldn’t matter all that much, the market wasn’t buying it. “Investors are having one reaction to the downgrade: sell first and ask questions later,” Paul Zemsky, head of asset allocation with ING Investment Management, was quoted as saying by CNN.

Few companies were spared. All members of the Dow 30 and all members of the S&P 500 traded lower. Financial stocks were among the hardest hit, with Bank of America plunging 20 percent, and Citigroup and Morgan Stanley dropped roughly 15 percent.

The VIX (VIX) — Wall Street’s so-called “fear’ index-jumped 44 percent to 45.98, the highest level since early 2009, according to CNN.

Obama, meanwhile, sought to reassure the public and markets during a midday speech. “The markets continue to reaffirm our credit as among the world’s safest,” said Obama.

“Our challenge is the need to tackle our deficits over the long term. But here’s the good news. Our problems are eminently solvable. And we know what we have to do to solve them.”