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NEW YORK (MarketWatch) — Standard & Poor’s cut its ratings outlook on the U.S. to negative from stable on Monday, lighting a fire under Washington’s deficit-reduction debate and sending stock markets sharply lower.

The rating agency effectively gave Washington a two-year deadline to enact meaningful change, just days after House Budget Committee Chairman Paul Ryan and President Barack Obama each outlined their plans for slashing debt. S&P nonetheless kept its highest rating, AAA, on the U.S.

Ratings selloff isn’t bear market startThe sharp selloff in stocks after Standard & Poor's cut its outlook on U.S. ratings doesn't signal the start of a bear market, says Max Bublitz, chief strategist at SCM Advisors. If stocks were really near a top, markets would have shrugged off the news. MarketWatch's Laura Mandaro reports.

Relative to triple-A-rated peers, the U.S. has very large budget deficits and rising government indebtedness, and the path to addressing those issues is unclear, S&P analysts said.

They noted an increasing gap between a lack of action by U.S. fiscal policy makers and steps taken by its AAA-rated peers, even after the Republicans and Obama administration released their 2012 budget proposals. S&P cuts U.S. rating outlook to negative - MarketWatch

Does this really surprise anyone with 14.3 trillion in red ink and another 53 trillion in unfunded liabilities?

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