Are the debt fears driving down the stock market in America?

The debt fears are having negative effects on the different financial markets and same is the case with the stock markets throughout the world. Thus the stock markets in America too have been going to through lows. Moreover, with the debt crisis in the US as the most dominant topic of discussion there have been some additional losses in the US stock markets. More people are plunging into debt and seeking debt consolidation. According to the financial experts and the debt consultants of America, the stocks are going to go through lows as a result of the debt crisis looming dark over the nation.

The stock market situation

The continuous debate over the cap on the debt ceiling has been fearing away the investors. According to recent reports (Monday 18/7/2011), the Dow Jones Industrial Average fell by 94.57 points which is 0.76% closing at 12,385.16. The broader S&P 500 too has dropped by 10.70 points to 1,305.44, which is by 0.81%. On the other hand, the tech-heavy NASDAQ Composite was seen to have slid by 24.69 points which is by 0.89% and closed at 2,765.11. This slide came after the top Democratic and Republican senators were seen struggling to get a compromise deal so as to raise the debt ceiling for the federal government by the 2nd of August, 2011. This is important in order to avert ant default on the part of the country for if this happens, the country will face financial crisis and will not be able to borrow nay further money from others.

In addition to the above, Bank of America, the largest bank in US in regards to the deposits, saw a fall of 2.8% on its stocks on the New York Stock Exchange; the Citigroup stocks too dropped by 1.7%. However, on the other hand, unlike stocks gold hit record highs even amongst such uncertainties. It even reached a high of $1,607.45 per troy ounce with regards to the intra-day trading.

Not only this, according to the experts if the country fails to increase the debt limit and if such uncertainty follows, the stock market will have to go through uncertainty too. There can be string of ups and downs in the stock markets. Moreover, the three major credit rating agencies have warned that such lack of progress regarding the final conclusion of the debt ceiling can lead to loss of AAA credit rating of the nation.

Many traders fear that if the credit rating of the country lowers, then the interest rates may soar and will have negative effect on the value of the dollar. All of these worries together are actually sapping the US stocks.