(Updates with after-hours market reaction to Moody's
* Dollar, bonds, stock futures fall after Moody's review
* U.S. dollar falls to all-time low versus Swiss franc
* Moody's after-hours announcement reverses earlier rally
By Herbert Lash
NEW YORK, July 13 U.S. stock futures and the
dollar fell late Wednesday after Moody's Investors Service
warned the United States may lose its prized AAA credit rating,
reversing a rally on Wall Street.
The credit ratings agency cited the growing risk that
Washington could fail to raise its $14.3 trillion government
debt limit "on a timely basis." For details, see [ID:nWNA3574]
U.S. government debt prices also fell. Benchmark 10-year
Treasury notes US10YT=RR slid 8/32 in price to yield 2.91
percent, while the dollar tumbled against most major currencies
and set another record low against the Swiss franc as
Thursday's Asian trading session opened.
The dollar fell as low as 0.8140 Swiss franc on electronic
trading platform EBS CHF=EBS. S&P 500 futures initially lost
about 11 points on the news to about 1,302 before recovering a
bit to 1,306, down 5.10 points from Wednesday's close.
"They've been threatening to do it for the last 60 days,"
said Cliff Draughn, president and chief investment officer at
Excelsia Investment Advisors in Savannah, Georgia. "What has
been beginning to spook Moody's and some other people is that
Congress may be dumb enough to actually default on the debt."
Investors have not fully appreciated the seriousness of a
potential credit downgrade, as most have expected an agreement
to be reached in Washington, said Troy Buckner, managing
principal at NuWave Investment Management in Parsippany, New
"This would likely be a game-changer over the very short
run and could cause large market dislocations very quickly,"
Some still held out for President Barack Obama and Congress
to broker a deal despite political brinksmanship and an
attitude toward default that is too cavalier, said David Joy,
chief market strategist at Ameriprise Financial in Boston.
Moody's announcement came after global stocks and the euro
had rallied following three days of losses. Risk assets were
spurred after Federal Reserve Chairman Ben Bernanke, in
testimonty to Congress, suggested the U.S. central bank could
provide more stimulus if the economic recovery in the United
Commodities also climbed, and gold had jumped to a record
near $1,590 an ounce.
Bernanke said the Fed was ready to ease monetary policy
further if the economy weakens and inflation moves lower.
The Fed ended its most recent asset-purchase program in
June. Traders said another round of easing would flood the
financial system with more money and encourage investors to
reach for higher-yielding currencies and assets.
The Fed's "easy money" policies since 2008 have helped
bolster stocks. The Standard & Poor's 500 index .SPX has
almost doubled since it touched a decade low in March 2009.
(Reporting by Herbert Lash; Editing by Leslie Adler)