Many commentators attributed the large decline in U.S. stock prices on Monday August 8, 2011 to the decision of Standard and Poor’s (S&P) to downgrade the credit rating of the U.S. government from AAA to AA+ with a negative outlook on Friday August 5, 2011, two other factors probably played a much larger role than the credit downgrade: (1) increasing pessimism about the outlook for the U.S. and European economies, and (2) growing doubt that the European Union (EU) can contain the euro-crisis.

On Tuesday, August 9, 2011, U.S. stock prices rallied following the Federal Open Market Committee’s (FOMC) announcement that conditions warranted keeping a near zero interest rate policy in place through mid-2013, but remain extremely volatile as evidenced by subsequent trading.

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