Meanwhile, the NASDAQ was down 2.68 on Thursday. Gold prices pulled back slightly from an all-time high to end at $1652 an ounce while oil dropped down from $92 a barrel to $83.
The losses weren't limited to the NYSE or NASAQ either. North of the border, the TSX Composite dropped 3.4% while in Asia the Nikkei was down 3.72%, Straits Time was down 3.61% and the Hang Seng index plunged 4.29% overnight.
Analysts believe that a concerns over the economy, high unemployment numbers, the recently passed debt ceiling deal and the ongoing Eurozone crisis played a part in Thursday's selloff.
The massive selloff comes a day before the July jobs report is set to be released, but investors and analysts have even less reason to optimistic as far as that's concerned.
Curiously, a number of experts that spoke out in favor of the debt ceiling cautioned that this was exactly the scenario the markets would face if the ceiling wasn't raised.
UPDATE 8/5:: The markets closed on a mixed note Friday afternoon, with the Dow-Jones up 60 (0.54%) and the NASDAQ down 24 points (0.94%). However, that was nothing compared to the bombshell that was dropped after the markets closed on Friday afternoon.
Credit rating agency Standard & Poor's on Friday lowered the nation's AAA rating for the first time since granting it in 1917. The move came less than a week after a gridlocked Congress finally agreed to spending cuts that would reduce the debt by more than $2 trillion -- a tumultuous process that contributed to convulsions in financial markets. The promised cuts were not enough to satisfy S&P.Interestingly, this is the exact opposite of what Treasury Secretary Tim Geithner said would happen if a debt ceiling agreement was reached.
The drop in the rating by one notch to AA-plus was telegraphed as a possibility back in April. The three main credit agencies, which also include Moody's Investor Service and Fitch, had warned during the budget fight that if Congress did not cut spending far enough, the country faced a downgrade. Moody's said it was keeping its AAA rating on the nation's debt, but that it might still lower it
Not surprisingly, the Obama Adminstration has gone after the messenger by shooting it with both barrels.
WASHINGTON, Aug 5 (Reuters) - The Obama administration attacked the credibility of the analysis underlying Standard & Poor's decision to downgrade the United States' top credit rating on Friday, saying it had found a $2 trillion error.Also unsurprisingly, Senate Majority leader Harry Reid (D-NV) used the occasion of the S&P's Downgrade announcement to call for
S&P was forced to remove the number from its analysis after Treasury officials discovered that the rating agency's estimates of the government's discretionary spending was $2 trillion too high, sources familiar with the discussions said.
There was evident dismay, and some anger, within the Obama administration at S&P's decision to downgrade U.S. debt despite the errors officials said they had found in the calculations.
"A judgment flawed by a $2 trillion error speaks for itself," a Treasury spokesman said after S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.
[Hat tip: Jammie Wearing Fool: Sea of Syrah]