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Markets plunged ahead of Moody's expected downgrade of the banking sector.
But first, the scoreboard:
Dow: 12,573.57, -250.8, -1.96%

Nasdaq: 2,859.09, -71.3, -2.44%

S&P 500: 1,325.51, -30.1, -2.23%

Here's what you need to know.
  • Before 8:00 a.m., Sky News reported rumors that Moody's would initiate downgrades of the U.K. banking sector. The report slowly gained its teeth. First Barclay's was identified as a potential candidate. Minutes later RBS, Lloyd's, and HSBC had their names thrown in.

  • U.S. markets opened flat after weak initial jobless claims and flash PMI report. Initial claims fell by 2,000 week-on-week to 387,000. However, that was above expectations for a 383,000 read and last week's figures were revised higher to 389,000. The U.S. flash PMI report also disappointed, falling 110 basis points to 52.9, an 11-month low. 

  • By mid-morning U.S. names like Morgan Stanley, J.P. Morgan, and Goldman Sachs were added to the list of banks that were expected to get hit with a downgrade. Reports out of CNBC and Dow Jones indicated that Moody's would ultimately take action on all 17 global banks it said it would take action on back in February. 

  • At 10 a.m. two gauges of the U.S. housing market were released - existing home sales and FHFA home prices. The FHFA house price index gained 0.8 percent sequentially in April, standing at  same the level as May 2004. Meanwhile, existing home sales missed expectations plunging 1.5 percent month-over-month. 


  • Also out at 10 a.m. was the Philadelphia Fed Survey which shows manufacturing conditions for the mid-Atlantic region. The general business conditions level collapsed to -16.6.

  • At noon a stress test report by Oliver Wyman showed Spanish banks would need up to €62 billion for a black sky scenario. The three biggest issues in Spain you need to be watching.

  • Oil prices were pressured, with crude oil falling almost 4 percent and dropping below $90 a barrel for the first time in 18 months following weak data out China, the U.S. and Europe. Meanwhile, natural gas prices surged as much as 3.5 percent after a bullish inventory report out of the EIA.

  • Just before the market close CNBC reported that Bank of America would be hit by a one-notch downgrade by Moody's. Citi, JP Morgan, and Goldman Sachs were reported to be hit by two-notch downgrades. The announcement is expected at 4 p.m. ET