European Debt Crisis Continued Cause for Concern

With Europe’s ongoing economic woes threatening to trigger a global economic meltdown, it was not surprising US Treasury Secretary Tim Geithner’s official statement to the International Monetary Fund focused on this topic during the 2011 Annual Meeting of the IMF and World Bank Group in Washington DC. In addition to expressing the need to ensure short term support of the US economy, along with taking steps to lower the US long-term deficits, his most pointed comments were on the situation in Europe, and more particularly the debt crisis of Greece, which he noted was a threat to the European banking system. While acknowledging the steps already taken, he urged that more be done to, as he expressed it, create a firewall against further contagion. Adding credence to these fears is the fact that Moody’s downgraded eight Greek banks last week citing anticipated losses, primary due to these financial institutions holding government bonds, as well as weak liquidity and the impact of the recession, as the reasons for their decision.

So in the week ahead on Wall Street, investors will no doubt be paying close attention to the European debt crisis, while at the same time taking full advantage of Operation Twist, which is reportedly being seen by traders and analysts as a renewed attempt to assist homeowners by means of lower mortgage rates, and a break away from previous policies put in place to pump up global financial asset prices through a weaker dollar. Last week closed with the Dow Jones down 6.4 percent, with the S&P 500 down 6.5 percent and the NASDAQ down 5.6 percent.

Monday on Wall Street includes August figures for new home sales, while the Case-Shiller 20-city home price index is due Tuesday morning. Also on Tuesday is the July consumer confidence index for July from the Conference Board, as well as quarterly results from Walgreens (NYSE: WAG). Wednesday includes the durable goods report from the US government, as well as quarterly earnings from Family Dollar (NYSE:FDO). Thursday sees the release of the third and final reading on economic growth for the second quarters, with the Labor Department’s weekly jobless claims numbers due before the day’s opening bell. The pending home sales report for July is due from the National Association of Realtors on Thursday. A government report detailing personal income and spending is due on Friday before the opening bell, with the Chicago PMI due after the bell. The final reading on consumer sentiment for September will be released by the University of Michigan after the market opens.