(NEW YORK) — The Dow Jones Industrial Average fell over 600 points Monday after a one-two punch: the first-ever Standard & Poor’s downgrade of U.S. debt, then the downgrading of government-backed mortgage debt. The Dow’s one-day drop of more than 600 points was its biggest point loss in a single day since December 1, 2008.
In closing figures, the Dow Jones Industrial Average sank 634.76 points at 10,809.
The Standard & Poor’s 500 stock index tumbled 78 points, or 6.5 percent, to 1123, with financial and energy stocks falling hardest.
Monday’s nose-dive came on the heels of President Obama’s proclamation that the United States knew well before the S&P downgrade that it had a debt problem.
“The U.S. will always be a triple-A country despite what rating agencies say,” he said.
The good news, he said, is the debt is a “solvable” problem that can be addressed through tax reform and spending cuts.
Investors don’t seem to agree. The Dow plunged another 100 points to hover around 500 after the president’s speech.
As stocks reeled, gold surged by $68 to a record $1,720 an ounce.
Investors were hoping for some sign that the steep market selloff of the last three weeks would abate. Those hopes were dashed when S&P announced the downgrade of the mortgage debt agencies, which are now owned by the U.S. government following their takeover in the 2007 financial crisis. Lower ratings on U.S. bonds and mortgage debt could mean higher interest rates, creating still more drag on the faltering U.S. economy.
Though government officials sought to find fault with S&P’s assessment, pointing out that the agency had made a $2 trillion error in its math, others say rampant government spending led to the downgrade.
“If we were running our affairs properly we wouldn’t have to worry about S&P, Moody’s and Fitch…,” Paul O’Neill, Treasury secretary in the Bush administration, told ABC News.
Since the late Friday announcement of S&P’s downgrade of the U.S. credit rating there were efforts across the world to calm markets. All weekend the White House has been fighting in some very strong language, calling the move “amateurish” and “breathtaking.”
A managing director at Standard & Poor’s told George Stephanopoulos on Good Morning America Monday that he has no second thoughts about the decision to cut the U.S. debt rating.
With global stocks sinking early Monday, S&P’s David Beers said the agency’s decision was based on factors including damage done to the U.S. reputation over the controversy surrounding the debt ceiling and concerns that underlying public finances are on an unsustainable path.
Asked if he had any second thoughts about the downgrade, Beers replied, “absolutely not.”