Investing.com – U.S. stock futures pointed to a sharply lower open on Monday, as market sentiment was rattled following an historic downgrade of U.S. government debt by ratings agency Standard & Poor’s.
Ahead of the open, the Dow Jones Industrial Average futures pointed to a loss of 2%, the S&P 500 futures sank 2.1%, while the Nasdaq 100 futures plunged 2.4%.
Ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed Friday.
The ratings agency kept the U.S. rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.
S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and “America’s governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed.”
Shares in the financial sector, many of which have large exposure to U.S. Treasuries, were down heavily in pre-market trade, tracking their global counterparts lower.
The largest U.S. lender Bank of America saw shares tumble 7.5%, Citigroup shares retreated 5.1%, JP Morgan Chase shares fell 2.5%, while U.S.-listed shares of Deutsche Bank slumped 3.1%.
Automakers also performed poorly, amid the uncertain outlook for the global economy. Shares in Ford Motors dropped 6.5%, rival General Motors was down 4.9%, while U.S.-listed shares of Toyota slumped 1.2%.
Raw material producers saw shares decline, after industrial metal and oil prices fell on the New York Mercantile Exchange.
Shares in mining giant BHP Billiton sank 3.8%, Freeport McMoran Copper & Gold saw shares drop 3.6%, while oil giant Exxon Mobil fell 2.1%
Other stocks in focus included, hotel and casino operator MGM Resorts and discount retailer 99 Cents Only Stores which were both slated to release earnings reports later in the day.
Across the Atlantic, European stock markets were broadly lower after a move by the European Central Bank to purchase Italian and Spanish government bonds failed to ease fears that the debt crisis could spill over to the region’s third and fourth largest economies.
The EURO STOXX 50 dropped 1.3%, France’s CAC 40 tumbled 2.1%, Germany's DAX sank 2.6%, while Britain's FTSE 100 fell 1.8%.
During the Asian trading session, Hong Kong’s Hang Seng Index declined 2.15%, while Japan’s Nikkei 225 Index slumped 2.2%, as markets got their first chance to react to Friday's U.S. debt downgrade.
Leaders from the Group of Seven leading economies said Sunday that they were ready to take every action necessary to stabilize financial markets.
"We are committed to taking coordinated action where needed, to ensuring liquidity, and to supporting financial market functioning, financial stability and economic growth," the G-7 said in a statement.
Ahead of the open, the Dow Jones Industrial Average futures pointed to a loss of 2%, the S&P 500 futures sank 2.1%, while the Nasdaq 100 futures plunged 2.4%.
Ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed Friday.
The ratings agency kept the U.S. rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.
S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and “America’s governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed.”
Shares in the financial sector, many of which have large exposure to U.S. Treasuries, were down heavily in pre-market trade, tracking their global counterparts lower.
The largest U.S. lender Bank of America saw shares tumble 7.5%, Citigroup shares retreated 5.1%, JP Morgan Chase shares fell 2.5%, while U.S.-listed shares of Deutsche Bank slumped 3.1%.
Automakers also performed poorly, amid the uncertain outlook for the global economy. Shares in Ford Motors dropped 6.5%, rival General Motors was down 4.9%, while U.S.-listed shares of Toyota slumped 1.2%.
Raw material producers saw shares decline, after industrial metal and oil prices fell on the New York Mercantile Exchange.
Shares in mining giant BHP Billiton sank 3.8%, Freeport McMoran Copper & Gold saw shares drop 3.6%, while oil giant Exxon Mobil fell 2.1%
Other stocks in focus included, hotel and casino operator MGM Resorts and discount retailer 99 Cents Only Stores which were both slated to release earnings reports later in the day.
Across the Atlantic, European stock markets were broadly lower after a move by the European Central Bank to purchase Italian and Spanish government bonds failed to ease fears that the debt crisis could spill over to the region’s third and fourth largest economies.
The EURO STOXX 50 dropped 1.3%, France’s CAC 40 tumbled 2.1%, Germany's DAX sank 2.6%, while Britain's FTSE 100 fell 1.8%.
During the Asian trading session, Hong Kong’s Hang Seng Index declined 2.15%, while Japan’s Nikkei 225 Index slumped 2.2%, as markets got their first chance to react to Friday's U.S. debt downgrade.
Leaders from the Group of Seven leading economies said Sunday that they were ready to take every action necessary to stabilize financial markets.
"We are committed to taking coordinated action where needed, to ensuring liquidity, and to supporting financial market functioning, financial stability and economic growth," the G-7 said in a statement.