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Market Recap: Stocks Take a Dive as S&P Downgrades France

Markets closed down on Wall Street today:

  • Dow -0.39 percent
  • S&P -0.49 percent
  • Nasdaq -0.51 percent
  • Oil +0.16 percent
  • Gold -0.52 percent

On the commodities front:

  • Oil (NYSE:USO) climbed to $99.26 a barrel
  • Gold (NYSE:GLD) fell to $1,639.10 an ounce
  • Silver (NYSE:SLV) fell 1.44 percent to settle at $29.60

(Related: Talks Over Greek Debt Writedowns Stall as Creditors Disagree on Scope of Losses)

Today’s markets were down because:

1) Downgrades: Ratings agency Standard & Poor’s has downgraded the government debt of France, Austria, Italy and Spain by one notch, but maintained Germany‘s at the coveted “AAA” level. The cuts, which eliminated France and Austria’s triple-A status, deal a heavy blow to the currency union’s ability to fight off a worsening debt crisis. Italy was lowered to BBB+ from A. Spain slipped to A from AA-. The downgrades come as crucial talks on cutting Greece’s massive debt pile appeared close to collapse Friday.

2) Trade: The U.S. trade deficit widened in November as an increase in imports weighed on economic growth, Commerce Department data showed on Friday. Imports rose 1.3 percent as exports fell 0.9 percent. And although a wider trade deficit subtracts from gross domestic product, higher imports are a sign of increased consumer demand within the country.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose in January, suggesting a stronger consumer-spending outlook consistent with the growth in imports. However, as the cooling global economy causes exports to taper off, it will soon have a negative effect on the prospects of a U.S. recovery.

3) Banks: JPMorgan led banks stocks lower, falling as much as 3 percent after the bank announced it earned just 90 cents per share in the fourth quarter, down from $1.12 a year earlier. Citigroup, Morgan Stanley, Bank of America, and Goldman Sachs all declined around 3 percent as well, while Wells Fargo’s, scheduled to report earnings on Tuesday, managed to close the day only slightly in the red. Citigroup is also set to report earnings next Tuesday, while Goldman will report on Wednesday and Bank of America and Morgan Stanley will report on Thursday.

[Editor’s note: portions of the above originally appeared on Wall St. Cheat Sheet.]

The Associated Press contributed to this article.

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