Global stocks sank Monday after a leading credit ratings agency warned of a deteriorating U.S. financial position and investors fretted over a debt default by bailed-out Greece.
Though Standard & Poor's reaffirmed its triple A rating on the U.S., it downgraded its credit outlook to negative from stable, citing a "material risk" that policymakers won't be able to agree on a plan to deal with the "very large" budget deficit.
"While it has been widely recognized that the U.S. credit rating may have been at some risk of a downgrade for years, S&P's action still comes as a major wake-up call for policymakers, and investors," said Douglas Porter, deputy chief economist at BMO Capital Markets. "This may well prompt more forceful action on the deficit in the next two years, which in turn will act as a more forceful drag on the economic recovery."
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