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Wall Street Spotlight on US Credit Rating, Corp Earnings

1 August 2011 - News - Editor

Following the announcement by US President Obama that an agreement had been reached on dealing with the country's debt ceiling, markets in Asia responded positively. Although the proposal to raise the US debt ceiling and make significant cuts in spending still needs to be approved by congress, analysts are anticipating that the response in Asian markets will carry through to Wall Street in the first day or two of the upcoming week, before the reality of the struggling jobs and housing market, along with the battle between upbeat corporate earnings and the fragile economic outlook, may curb investor enthusiasm.

Lawmakers have been battling to reach consensus on the debt ceiling for weeks now, and although an agreement has been reached, investors are likely concerned that the US may still lose its AAA credit rating as measured by Moody's and Standard & Poor's. Currently there are only seventeen countries in the world with AAA ratings - Australia, Austria, Canada, Denmark, Finland, France, Germany, Isle of Man, Luxembourg, Netherlands, New Zealand, Norway, Singapore, Sweden, Switzerland, United Kingdom and United States. The AAA rating facilitates the low-cost borrowing of funds based on the governments being considered stable, and their bonds therefore deemed to be safe. Even if the US retains its AAA rating, analysts agree that the country has lost a measure of credibility in the international community and whether this can be corrected remains to be seen.

On Monday Wall Street investors will have access to the manufacturing report for August from the Institute for Supply Management, as well as June construction spending figures from the Commerce Department. Second quarter earnings are due from Allstate (NYSE: ALL) and Humana (NYSE: HUM). Tuesday's reporting activity includes second quarter results from CBS Corporation (NYSE: CBS), Pfizer (NYSE: PFE), Archer Daniels Midland (NYSE: ADM), and NYSE Euronext (NYSE: NYX). July sales figures from US automakers are also due on Tuesday, along with personal income and spending data from the Commerce Department.

Wednesday's corporate earnings include Clorox (NYSE: CLX), Time Warner (NYSE: TWX), MasterCard (NYSE: MA), and Prudential (NYSE: PRU). Other market-moving statistics include ADP's private employment report, the service sector index from the Institute for Supply Management, and factory orders data from the Commerce Department. Thursday sees second quarter corporate earnings from Kraft (NYSE: KFT), Southwest Airlines (NYSE: LUV), CVS Caremark (NYSE: CVS), First Solar (NASDAQ: FSLR), and AIG (NYSE: AIG). Initial jobless claims data from the Labor Department will be available at 8:30 am on Thursday, with the department’s July jobs report being published on Friday. Corporate companies reporting on Friday include Proctor & Gamble (NYSE: PG), Washington Post (NYSE: WPO), and Viacom (NYSE: VIA).

 


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