Black Monday (2011)
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finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
and investing, Black Monday 2011 refers to August 8, 2011, when US and global stock markets
crashed "Crashed" is the third U.S. rock single, (the fifth overall), from the band Daughtry's debut album. It was released only to U.S. rock stations on September 5, 2007. Upon its release the song got adds at those stations, along with some Alternativ ...
following the Friday night credit rating downgrade by Standard and Poor's of the United States sovereign debt from AAA, or "risk free", to AA+. It was the first time in history the United States was downgraded. Moody's issued a report during morning trading which said their AAA rating of U.S. credit was in jeopardy, this after issuing a negative outlook in the previous week. By market close, the Dow Jones Industrial Average lost 634.76 points (-5.55%) to close at 10,809.85, making it the 6th largest drop of the index in history. Black Monday 2011 followed just one trading day behind the 10th largest drop of the Dow Jones Index, a 512.76 (-4.31%) drop on August 4, 2011.


U.S. Presidential reaction

U.S. President The president of the United States (POTUS) is the head of state and head of government of the United States of America. The president directs the executive branch of the federal government and is the commander-in-chief of the United States ...
Barack Obama attempted to calm the markets during trading in a speech from the White House, but the DOW lost 200 more points within 20 minutes of it concluding."EDITORIAL: Markets to Obama: shut up"
Washington Times. 8 aug 2011. Retrieved 9 aug 2011


U.S. market aftermath

The
NASDAQ The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
Composite Index fell 174.72 points (-6.90%) closing at 2,357.69, the S&P 500 Index shed 79.92 points (-6.66%), the New York Stock Exchange lost 523.02 points (-7.05%), finishing the day at 6,896.05, and the Dow Jones Industrial Average lost 634.76 points (-5.55%) to close at 10,809.85. Both the Dow Jones Industrial Average and the NASDAQ Composite Index ended the day at their respective session lows.


Relationship to United States debt ceiling crisis

The United States debt ceiling crisis was a financial crisis that started as a political and economic debate over increasing the statutory limit of US federal government borrowing. The limit of the indebtedness of the government of the United States is also known as the debt ceiling. In the run up to the crisis, the United States had approached, and actually passed, this limit. Since the United States Department of the Treasury has no authority to issue or incur debt beyond the debt ceiling set by the United States Congress, failure to reach an agreement between the necessary members of the government to raise the debt ceiling meant that certain debts would not be paid, and this would potentially affect the government's ability to borrow quickly or at low cost, due to a perception of increased risk in loaning money to the US government. If the debt ceiling were not raised by August 2, 2011, either government spending would have to be decreased, or debt would have to be paid later than promised, also known as a default. The debate was contentious, with nearly all Republican legislators opposing any increase in taxes and the large majority of
Democratic Democrat, Democrats, or Democratic may refer to: Politics *A proponent of democracy, or democratic government; a form of government involving rule by the people. *A member of a Democratic Party: **Democratic Party (United States) (D) **Democratic ...
legislators viewing tax increases as necessary along with spending cuts. Supporters of the Tea Party movement pushed Republicans to reject any agreement that failed to incorporate large and immediate spending cuts or a completed balanced-budget
constitutional amendment A constitutional amendment is a modification of the constitution of a polity, organization or other type of entity. Amendments are often interwoven into the relevant sections of an existing constitution, directly altering the text. Conversely, t ...
. The immediate crisis of 2011 ended when a complex deal imposing limits on both debt and government spending was reached on July 31. After the legislation was passed by both the House and Senate, President Barack Obama signed the
Budget Control Act of 2011 The Budget Control Act of 2011 () is a federal statute enacted by the 112th United States Congress and signed into law by US President Barack Obama on August 2, 2011. The Act brought conclusion to the 2011 US debt-ceiling crisis. The law inv ...
into law on August 2, the day of the deadline. However, because of the political upheaval caused and the perception by powerful
credit ratings A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting. ...
agencies that the United States government could not effectively manage its large debt positions, the largely anticipated positive effects that the debt deal would have on the markets never came to fruition. Instead, following the downgrading of US sovereign debt, as well as the Fannie Mae and Freddie Mac government-backed lenders by Standard and Poor's from a AAA to a AA+ rating, the global stock markets experienced a prolonged period of heightened selling activity ultimately resulting in the crash of Black Monday 2011.


See also

*
Black Monday (1987) Black Monday is the name commonly given to the global, sudden, severe, and largely unexpected stock market crash on Monday, October 19, 1987. In Australia and New Zealand, the day is also referred to as ''Black Tuesday'' because of the time zo ...
* Wall Street Crash of 1929 * 2010 Flash Crash *
List of largest daily changes in the Dow Jones Industrial Average This is a list of the largest daily changes in the Dow Jones Industrial Average from 1896. Compare to the list of largest daily changes in the S&P 500 Index. Largest percentage changes The first four tables show only the largest one-day chang ...


References

{{reflist 2011 in economic history Monday Stock market crashes