Credit downgrade sends markets tumbling

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U.S. stocks dropped sharply this morning in response to Friday's announcement by Standard & Poor's that it had lowered the country's credit rating.

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics,” S&P said in a statement.

“More broadly, the downgrade reflects our view that the effectiveness, stability and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011,” the rating agency added.

S&P’s long-term sovereign credit rating on the United States was lowered to AA+ from AAA.

When the markets opened this morning, the Dow Jones industrial average dropped about 200 points, the S&P 500 index declined about 22 points and the Nasdaq Composite Index fell more than 63 points.