Group Of Seven
Oil sank as much as 4.3 percent to $83.18 a barrel in electronic trading.
Members of Group of Seven nations agreed to inject liquidity into financial markets as needed and the European Central Bank started buying Italian and Spanish bonds to curb the region's financial crisis, sparking a rally in the debt of the most-indebted nations.
S&P's action may hurt the U.S. economy over time by increasing the cost of mortgages, auto loans and other lending tied to the interest rates paid on Treasuries. JPMorgan Chase & Co. estimated that a downgrade would raise the nation's borrowing costs by $100 billion a year. The U.S. spent $414 billion on interest in fiscal 2010, or 2.7 percent of gross domestic product, according to Treasury Department data.
Weeks Of Debate
After weeks of debate, lawmakers agreed on Aug. 2 to raise the nation's $14.3 trillion debt ceiling and put in place a plan to enforce $2.4 trillion in spending reductions over the next 10 years, less than the $4 trillion that S&P had said it preferred.
S&P analysts David Beers and John Chambers said that the "extremely difficult" political discussions over how to reduce the more than $1 trillion budget deficit carried more weight in their decision than the nation's debt.
The "debate this year has highlighted a degree of uncertainty over the political policymaking process which we think is incompatible with the AAA rating," Beers said on an Aug. 6 conference call with reporters.
Chambers, the chairman of S&P's sovereign debt committee said in an interview on Bloomberg Television that "this is a problem that has to be addressed by the full spectrum of political parties."
S&P's decision provided Republican leaders with an opportunity to criticize Obama's administration.
'Troubling Indicator'