U.S. President Barack Obama took to the airwaves today to try to calm a stock market set in turmoil by after market analysis firm Standard & Poor’s downgraded the U.S.’s debt rating to AA+ from AAA.
Obama said that he was aware of the challenges facing the economy and the skepticism in the market about whether the country’s debt problems will be solved.
“We have always been a triple-A country and always will be,” Obama said.
He said the gridlock between Democrats and Republicans has not been constructive but that he is confident that “our problems are eminently solvable.” He proposed that Congress now start working on tax reform and modifications to programs such as Medicare to bring down the debt further. He also proposed an extension in the payroll tax cut for another year. It will take “common sense and compromise,” he said.
“My hope is that Friday’s news will give us a renewed sense of urgency,” he said.
The immediate reaction produced no uptick in the Nasdaq or the Dow.
The big question for tech stocks is whether the stock market and overall economy will continue to decline. Tech mergers and highly anticipated initial public offerings have lit a fire under the market for cool startups and big tech companies alike. Zynga and Groupon are still trying to go public, but now the question is whether their market window is closing.
Congress and President Obama avoided a historic default on the debt last week, but that wasn’t enough to bring confidence to the market. Standard & Poor’s downgraded the U.S.’s debt rating, implying that the country is slightly less trustworthy as an investment. The markets tumbled in reaction this morning, with the Dow down 3.5 percent and the Nasdaq down 4.5 percent.
Tech stocks have typically been able to weather major hits on the stock market. But major tech companies that have a lot of international business are now exposed to market weaknesses thanks to growing concerns in Europe over a mounting debt crisis.
“Most of the big internet names are well diversified geographically, with Google, Amazon, and eBay all having just over 50 percent of sales outside the us,” Macquarie Securities analyst Ben Schachter told VentureBeat. “Typically, this diversification is positive, but with rising concerns about European macroeconomic issues, these stocks are being penalized.”
Tech bellwethers’ drops were in line with drops in the Nasdaq and S&P 500. Computer manufacturer Dell was down 3 percent. Online retailer Amazon was down 3 percent, while search giant Google was down more than 3 percent. Intel is up 0.2 percent after an analyst upgrade. Qualcomm is down 4 percent. Apple is down 2.7 percent.
Roger Kay, a tech analyst at Endpoint Technologies, said he thinks that strong tech companies will weather any downturn becauase they have little dependence on debt, lots of cash, decent earnings, future prospects, and good dividend yields.
Trip Hawkins, chief executive of mobile and social game firm Digital Chocolate, said, “For Silicon Valley, a slump in the public stock markets is often the best time to invest in startups. And don’t forget, what goes down will come back up.”