Dow Closes Down 140 Points

 

The Wall Street Journal

Stocks suffered a rout after Standard & Poor's cut its outlook on the U.S. government, warning that the U.S. fiscal profile may become "meaningfully weaker" than that of other triple-A-rated countries if policy makers can't tame the budget deficit.

Stocks tumbled Monday after Standard & Poor's cut its credit outlook on the U.S. to negative, increasing the likelihood of a potential downgrade from its triple-A rating.
The Dow Jones Industrial Average fell 140.24 points, or 1.1%, to 12201.59, led lower by Bank of America and Caterpillar, which each fell 3.1%.
The Standard & Poor's 500-stock index dropped 1.1% to 1305.13, with energy and industrials stocks taking the hardest hit. At session lows, both measures staged their biggest drop in a month.
The Nasdaq Composite fell 1.1% to 2735.38.
The ratings firm cut its outlook on U.S. government debt to "negative" from "stable," to account for budget deficits and rising government indebtedness.
"We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013," credit analyst Nikola G. Swann wrote.
The Treasury Department issued a statement contending that S&P's negative outlook "underestimates the ability of America's leaders to come together to address the difficult fiscal challenges facing the nation." Sandy Lincoln, chief investment strategist at M&I Investment Management, said the revision was a "shot over the bow" in Washington that could aid markets if it helps lawmakers overcome political disagreements on handling the debt. "
This says, 'Please get your act together and find some way to a consensus viewpoint,' " he said.
The dimmer debt outlook overshadowed corporate earnings just as reporting season was getting into high gear.
Among stocks in focus, Citigroup rose 0.2% following the banks better-than-expected first-quarter earnings and declining net credit losses. Revenue fell shy of forecasts.
Eli Lilly fell 1.1% despite the drug company's better-than-expected first-quarter results, which benefited from cost cutting and higher sales of several blockbuster drugs.
Halliburton gained 0.9% after the oil-field-service company's first-quarter profit more than doubled.
Chief Executive David Lesar said there was "clearly room for revenue and operating incomes to grow" in 2011.
Community Health Systems fell 4.5% as the company converted its roughly $3.3 billion bid for Tenet Healthcare to an all-cash offer, the latest salvo in the hospital operator's hostile pursuit of its smaller rival. Tenet's stock fell 2.1%.
In economic data, U.S. home builders' confidence slipped in April, indicating that more tough times are in store for the industry.