NEW YORK — Hope that the Federal Reserve might consider more economic stimulus wasn’t enough to keep bad news about Ireland from sinking stocks.
Ireland’s government bonds were downgraded by ratings agency Moody’s to junk status shortly before U.S. markets closed Tuesday, sending stocks sharply lower and erasing the day’s gains. Ireland joins Greece and Portugal, whose debt was also recently graded as junk.
The move puts Ireland back on the list of heavily indebted European countries in danger of default.
The country has already received a financial-rescue package from other countries. If a European country fails to pay its debts, it could cause widespread disruptions in financial markets and lead to a slowdown in lending. Worries about debt problems in Europe sent stocks down through the first half of June and appear to be having the same effect in July.
The Standard & Poor’s 500 fell 5.85, or 0.4 percent, to close at 1,313.64. The S&P is now down 0.5 percent for the month and 2.2 percent for the week. The Dow Jones industrial average fell 58.88, or 0.5 percent, to close at 12,446.88. The Nasdaq composite fell 20.71, or 0.7 percent, to close at 2,781. Both the Dow and Nasdaq are still up about 0.3 percent for the month.
Investors also felt some relief after a meeting of 17 European finance ministers Monday resulted in a statement that implied they were open to buying distressed Greek bonds.
Earlier Tuesday, minutes from the Federal Reserve’s last meeting on June 21-22 were released. In those minutes, several Fed officials said that the government would have to consider new monetary policy to stimulate the economy, especially if growth remains too slow to reduce the unemployment rate.
That raised hopes that more economic stimulus might be on the way. The Dow rose about 60 points after the minutes were released, but retreated not long after.
Stocks bounced between small gains and losses for most of the day amid worries that Italy would need help managing its debts. A successful auction of new Italian government bonds and a promise to fast-track that country’s austerity measures helped ease those fears.
