Friends
The rating agency S&P reaffirmed the United States debt rating at AAA this morning, but put the U. S. on a negative credit watch. What does this mean? Well, if the folks in Washington don’t address the mounting debt problems in this country then the inevitable outcome would be a downgrading of our debt rating from the coveted AAA status. Is this a surprise to anyone that the U.S. needs to address this situation? Apparently, stock market traders thought that this was as good a reason as any to sell stocks, and the market promptly fell well over 200 Dow points in early morning trading. Stocks had already looked weak in pre-market futures, and the S&P announcement right before the opening was just the spark needed to fan the flames.
This ratings announcement today by S&P should serve the constructive purpose of emphasizing to Congress and the White House that now is the time to begin the process of repairing our country’s balance sheet. Nothing like a little slap in the face to get their attention, and on tax day nonetheless. Very ironic.
As for the markets, bonds sold off a bit at first, but rallied as the day wore on. The very item that S&P indicated was worth watching in terms of risk, U. S. Treasury bonds, actually was the item of bond trader’s affection as prices rose later in the day. Go figure. Stocks, on the other hand, did recover some in the last two hours of trading. The Dow had been down slightly less than 250 points but rallied to end the day down 140 points. On the positive side, the 1300 level on the S&P 500 did end up holding in for the day with that index closing at 1305.
Trader’s attention will likely be drawn back to earnings as the week progresses, but for a day, the idea that a combination of spending cuts and higher taxes to address a mounting debt load would cause a domestic economic slowdown, was the story. If this wasn’t already painfully obvious, it is now.
Have a nice evening everyone. We’ll keep you up to date as the week proceeds.
