Offer your thoughts or opinion on the input financial query or topic using your financial background.

What is the rationale behind stock markets retreating due to S&P having a negative outlook on the USA?
Many of the major indices retreated   today because of this news. Why? How   do the rising budget deficits and debt   relate to the stock markets? It does seem strange that there is a correlation between government debt and the stock market.  But I could see many reasons for the reaction.  The downgrade by S&P may make it more expensive for the government to borrow money (i.e. higher interest rates).  This means it becomes more expensive for the government to borrow money and the government will probably need to raise taxes to cover the cost of borrowing.  Rising taxes are not good for business.  Also, many banks in the US hold US government debt.  Rising yields will push down the value of their holdings which in turn will reduce the value of US debt on the businesses' balance sheets.  This weakens the banks' balance sheets.  They may even start to unload US bonds. Why is there such a large emphasis on   the S&P rating? I don't know.  I think they have proven they are practically useless.  That's just my opinion.  Many, though, still think they are a credible ratings agency. What happens when the debt ceiling is   reached? Theoretically the government has to stop borrowing money once the debt ceiling is reached.  If this occurs and the government does not raise the debt ceiling then the government faces three choices: