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Debt Ceiling, Corporate Results Dominate Wall Street

25 July 2011 - News - Editor

With the credit rating of the United States hanging in the balance as authorities continue negotiations and discussions regarding the country’s debt ceiling, individual states around the nation are reported to be drawing up contingency plans to deal with the consequences of failure to reach consensus by the August 2 deadline. Currently the United States does not bring in sufficient funds to cover its financial obligations, with deficits averaging $125 billion per month. If the debt ceiling is not raised, allowing the treasury to borrow additional funds to close the gap between income and expenditure, it has been estimated by the Bipartisan Policy Center that more than 40 percent of the 80 million payments the US government makes each month will not be processed. Although it is not yet clear as to who will be directly affected, these non-payments may include federal worker and military paychecks as well as social security checks, food stamps, and payments to Medicaid and Medicare providers.

While debt ceiling concerns are expected to dominate Wall Street in the coming week, there are a number of market-moving factors to focus on as well. Up to 180 S&P 500 listed companies will be reporting second quarter financial results. Of the 143 S&P 500-listed companies to have reported thus far, 75 percent have performed above expectations. Notably, in the week ahead financial results will be released by 3M (NYSE:MMM), Ford (NYSE:F), Merck (NYSE:MRK), and Exxon Mobil (NYSE:XOM). The week is set to close with second quarter US gross domestic product being made available. Analysts expect the US economy to have grown by 1.6% pa in the three month period under review.

With no economic data being released on Monday, investors can focus on second quarter corporate results, with Texas Instruments (NYSE:TXN) and Netflix (NASDAQ:NFLX) being among the companies reporting. Spread out throughout the day, Tuesday sees reports from 3M (NYSE:MMM), Ford (NYSE:F), US Steel (NYSE:X), First Solar (NASDAQ:FSLR), UPS (NYSE:UPS), Electronic Arts (NASDAQ:ERTS), and Amazon (NASDAQ:AMZN), among others. The S&P Case-Shiller Home Price Index and July’s consumer confidence report from the Conference Board are also due on Tuesday.

Boeing (NYSE:BA) is expected to report before Wednesday's opening bell, and companies to follow suit during the day include Corning (NYSE:GLW), Conoco Phillips (NYSE:COP), Dow Chemical (NYSE:DOW), and Visa (NYSE:V). Moreover, on Wednesday the Federal Reserve's Beige Book will be published, and the Commerce Department will release durable goods figures for June.

Weekly jobless claims will be published by the Labor Department on Thursday, with economist expecting claims to be around 415,000. Notable corporate results for the day will come from Exxon Mobil (NYSE:XOM), MetLife (NYSE:MET), and Starbucks (NASDAQ:SBUX). Friday starts the day with results from Chevron (NYSE:CVX) and Merck (NYSE:MRK). The consumer sentiment survey compiled by University of Michigan will be released later, as will the first reading on second-quarter GDP.

 


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