S&P said on Aug. 22 that it will replace President Deven Sharma with Citibank NA Chief Operating Officer Douglas Peterson at the end of the year as the ratings company faces regulatory scrutiny. The U.S. Senate Banking Committee is looking into the downgrade decision, a committee aide briefed on the matter said Aug. 8. The Securities and Exchange Commission is also scrutinizing the method S&P used and whether the firm protected the confidential decision, a person with direct knowledge of the matter said Aug. 15.

"The fact that S&P's president is stepping down is interesting timing," Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., said in an Aug. 23 telephone interview. Her firm manages $883 billion. "It begs the question whether S&P thought that everything was fine with this downgrade, its timing and its consequences."

'No Connection'

"There's no connection between the downgrade of the U.S. and Mr. Sharma's departure," S&P's Sweeney said in a phone interview.

Peterson became head of Citigroup's Japan operations in May 2004, a role he kept until January 2010. In November 2004, he became the first foreigner to testify before a Japanese parliamentary committee after regulators found Citigroup's local private bank failed to conduct proper money-laundering checks.

"My mandate is to fix problems," Peterson said during 90 minutes of questioning by lawmakers from governing and opposition parties in the upper house. The probe forced Citigroup to close the private bank and send then-Chief Executive Officer Chuck Prince to Tokyo, where he apologized to regulators and bowed in a gesture of remorse.

Most Since 2008

The S&P 500's 6.7 percent drop on Aug. 8 was the biggest daily decline since December 2008, the height of the financial crisis spurred by Lehman Brothers Holdings Inc.'s bankruptcy. The index has lost 12 percent since July 22, as the debate about extending the debt-ceiling spurred concern the U.S. government would default. It alternated between gains of losses of more than 4.4 percent in the four days after the downgrade, the first time that's ever happened.

Shares of financial firms and banks led declines since the downgrade, losing 5.5 percent as a group. Energy companies and technology stocks have lost more than 3.2 percent. The S&P 500 Aerospace & Defense Index, made up of companies from Northrop Grumman Corp. to Lockheed Martin Corp. that depend on U.S. government spending for revenue, has declined 3.2 percent in the same period.

Northrop, the third-largest U.S. defense contractor, fell 5 percent even after saying second-quarter earnings exceeded analyst projections on July 27. While the shares are beating the S&P 500 by 2.2 percentage point so far this week, companies that don't rely on the government for a significant portion of revenue, such as Host Hotels & Resorts Inc. and Monster Worldwide Inc., have also declined.