The Dow Jones industrial average ($INDU) fell 104 points, or 1%, to 10,285. The Standard & Poor's 500 index ($INX) fell 11 points, or 1%, to 1,091. The the Nasdaq ($COMPX) composite index fell 16.6 points, or 0.76%, to 2,173. The Dow was down as much as 140 points in morning trading.
Negative news encouraged investors to take profits. Doubts about the economic recovery were fueled as key manufacturer 3M lost 1.1% as it reported lower-than-expected earnings for the year. Adding to the dour mood was McDonald's, whose shares fell 2% as it reported lower sales in November due to competitors intensifying low-price campaigns.
Positive news from market bellweather FedEx Corp.(FDX), which was up 3% as it projected earnings well above analysts' estimates, did nothing to stop the slide.
Making matters worse, Fitch Ratings downgraded its credit rating on Greece to BBB+ from A-, citing "concerns over the medium-term outlook for public finances given the weak credibility of fiscal institutions and the policy framework in Greece."
Moody's downgraded a number of Dubai's largest companies, including DP World, Dubai Electricity and Water Authority, Emaar Properties, Jebel Ali Free Zone, Dubai Holding Commercial Operations Group, and DIFC Investments. Moody's is concened that the government of Dubai would not back the repayment of the companies' debt.
Moody's also warned that the U.S. and the U.K. need to take strong steps to curb government debt if they want to maintain their triple-A sovereign credit ratings.
The downgrades and warnings served to strengthen the U.S. dollar and weaken commodities. The greenback rose 0.6% and commodities tumbled. Oil prices fell to $72.77 a barrel. Gold continued its recent slide, dropping to $1,129 an ounce at closing.