Is the US no longer the safest place to invest?
After S&P downgraded the long-term credit outlook for the US, some traders are wondering whether the country is still the best place to invest
Jeffrey Sheldon Jr., left, of Knight Capital Americas uses a controller while looking at his monitor on the floor of the New York Stock Exchange, Monday, Apr. 18, 2011, in New York. Stocks are sharply lower after Standard & Poor's issued a warning on U.S. government debt. Fears about Europe's debt problems are also pushing markets lower.
Henny Ray Abrams / AP
By Catherine Holahan, Producer , CNBC.com
Will the U.S. lose its status as the safest place to invest?
That was the question for Fast Money traders Monday morning after Standard & Poor’s analysts cut the U.S. long-term debt outlook rating to negative from stable.
Standard & Poor’s reaffirmed the U.S. ‘s AAA/ A-1+ rating. But the market still sold off sharply on the outlook downgrade. The Dow was down nearly 170 points by 11 a.m. The Nasdaq and S&P 500 were each down more than 1%.
The fear for investors is that the specter of a U.S. default could spark a double-dip recession by raising U.S. borrowing costs, making it more difficult for the U.S. to borrow and spend its way to recovery, and ultimately raising borrowing costs for banks and homeowners. U.S. ten-year treasury yields were slightly higher after Standard & Poor’s published its note Monday morning. U.S. 30-year treasuries fell a full point in response.
Standard & Poor’s argument for increasing U.S. credit risk is difficult to argue with. The U.S., S&P analysts wrote, “has relative to its ‘AAA’ peers what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us.”
