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This Day In Market History: US Government Receives First And Only Credit Rating Downgrade

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This Day In Market History: US Government Receives First And Only Credit Rating Downgrade

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened?

On this day eight years ago, Standard & Poor's cut the United States’ credit rating from AAA to AA+.

Where The Market Was

The Dow Jones Industrial Average closed at 11,444 and the S&P 500 traded at 1,199. Today, the Dow is trading at 26,485 and the S&P 500 is trading at 2,932.

What Else Was Going On In The World?

In 2011, a 9.0 magnitude earthquake off the coast of Japan triggered a tsunami that disabled the Fukushima Daiichi Nuclear Power Plant and caused several meltdowns. The U.S. military officially repealed its “Don’t Ask, Don’t Tell” policy on homosexuals in the armed forces. The average price of a new house was $262,260.

U.S. Credit Cut

After navigating the 2008-20009 financial crisis, the United States government got its first credit downgrade in history in 2011. Standard & Poor's dropped the U.S. rating from AAA to AA+, marking the first time U.S. credit was not considered to be “prime.”

The move came just days after President Barack Obama signed legislation that would lower the federal deficit by $2.1 trillion over the next decade. S&P said anything short of a $4 trillion cut would be too conservative.

Moody’s and Fitch also dropped their outlooks for U.S. credit to “negative” in 2011, but neither agency cut their ratings from AAA.

The rating cut triggered a 6.6% drop in the stock market on the following Monday. U.S. debt had long been considered among the safest investments in the world.

S&P has maintained its AA+ rating for U.S. debt to this day and currently has a “stable” outlook.

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