Dow rose 83, advancers ahead of decliners 5-2 & NAZ gained 9. The Financial Index added 1+ to go back over 210. The MLP index fell 1 to 395 & the REIT index was up a fraction in the 268s, staying close to its 270 high reached last week. Junk bond funds edged higher & Treasuries were mixed after the threat for another downgrade. The markets for oil & gold were quiet.
Photo: Yahoo
The US may lose its Aaa debt rating if next year's budget negotiations do not produce policies that over time decrease the country's debt, Moody's said. "If those negotiations lead to specific policies that produce a stabilisation and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable," Moody's said. "If those negotiations fail to produce such policies, however, Moody's would expect to lower the rating, probably to Aa1." Rival ratings agency S&P stripped the US of its top ratings last year after Congress failed to come up with a long-term deficit reduction plan. Moody's rates the US Aaa but has the country on negative outlook & that probably won't change until after Congress concludes budget talks next year, it said. But the current situation was unlikely to persist beyond 2014, the agency said. That would only happen if the method Congress adopted to reduce the deficit involved a large fiscal shock. "Moody's would then need evidence that the economy could rebound from the shock before it would consider returning to a stable outlook," the agency said. Such a shock could come if Congress allows a slate of temporary tax cuts to expire as planned at year-end & automatic spending cuts would also be triggered. The Congressional Budget Office said such an outcome could shrink GDP product by 2.9% in H1 next year & Americans should expect a "significant recession" along with the loss of 2M jobs.
U.S. Rating May Be Cut by Moody’s If Debt-to-GDP Not Reduced
Photo: Yahoo
McDonald's, a Dow stock & Dividend Aristocrat, reported a weaker-than-expected 3.7% rise in Aug sales at established restaurants around the world, as austerity measures in Europe & global economic volatility weighed on results. Analysts were expecting a gain of 3.9% at restaurants open at least 13 months. Still, the results show a rebound from Jul, the worst month in more than 9 years. MCD had flat same-restaurant sales around the world for that period, on slight declines in all 3 of its major regions. Aug same-restaurant sales were up 3% in the US & up 3.1% in Europe. Analysts had expected a 3.1% rise for the US & a 3.3% increase in Europe. Europe is its #1 market, just edging out the US. Positive results in the UK, France & Russia offset weakness in Germany & certain Southern European markets. These results are another indication about business conditions around the world. The stock gained 54¢.
McDonald’s August Same-Store Sales Rise 3.7%
The US trade deficit widened in Jul for the first time in 4 months as the global economic slowdown reduced demand for American-made goods. The gap grew 0.2% to $42B, smaller than projected, from a revised $41.9B in Jun, according to the Commerce Dept. The forecast called for a $44B deficit. Exports fell by the most since Apr, outpacing a decline in imports that reflected cheaper petroleum. A stagnant Europe & weaker economies in emerging markets such as China may be starting to sap demand for US products, a source of strength for the expansion in Q2. At the same time, a rebound in crude oil prices may lead to a higher American import bill. This is another negative for the US economy.
Trade Gap in U.S. Widened to $42 Billion as Exports Fell
The news was clearly negative, but that didn't hold back the bulls. They are hoping for another kind of a bailout by the Federal Reserve (FED) at the FOMC meeting. Even if there is a move, it may not help markets which are already discounting it. The trade data was glum. Maybe a credit downgrade for the US won't matter since US debt is still seen as a safe have for nervous investors. But it still would represent a kick in the head. Dow is within 70 of making a new high for 2012, although that may not be a critical ceiling.
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month | 0.097% | |
U.S. 2-year | 0.246% | |
U.S. 10-year | 1.680% |
| CLV12.NYM | ...Crude Oil Oct 12 | ...97.03 | ....0.49 | (0.5%) |
| GCU12.CMX | ...Gold Sep 12 | .....1,732.20... |  5.30 | (0.3%) |
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The US may lose its Aaa debt rating if next year's budget negotiations do not produce policies that over time decrease the country's debt, Moody's said. "If those negotiations lead to specific policies that produce a stabilisation and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable," Moody's said. "If those negotiations fail to produce such policies, however, Moody's would expect to lower the rating, probably to Aa1." Rival ratings agency S&P stripped the US of its top ratings last year after Congress failed to come up with a long-term deficit reduction plan. Moody's rates the US Aaa but has the country on negative outlook & that probably won't change until after Congress concludes budget talks next year, it said. But the current situation was unlikely to persist beyond 2014, the agency said. That would only happen if the method Congress adopted to reduce the deficit involved a large fiscal shock. "Moody's would then need evidence that the economy could rebound from the shock before it would consider returning to a stable outlook," the agency said. Such a shock could come if Congress allows a slate of temporary tax cuts to expire as planned at year-end & automatic spending cuts would also be triggered. The Congressional Budget Office said such an outcome could shrink GDP product by 2.9% in H1 next year & Americans should expect a "significant recession" along with the loss of 2M jobs.
U.S. Rating May Be Cut by Moody’s If Debt-to-GDP Not Reduced
McDonald's, a Dow stock & Dividend Aristocrat, reported a weaker-than-expected 3.7% rise in Aug sales at established restaurants around the world, as austerity measures in Europe & global economic volatility weighed on results. Analysts were expecting a gain of 3.9% at restaurants open at least 13 months. Still, the results show a rebound from Jul, the worst month in more than 9 years. MCD had flat same-restaurant sales around the world for that period, on slight declines in all 3 of its major regions. Aug same-restaurant sales were up 3% in the US & up 3.1% in Europe. Analysts had expected a 3.1% rise for the US & a 3.3% increase in Europe. Europe is its #1 market, just edging out the US. Positive results in the UK, France & Russia offset weakness in Germany & certain Southern European markets. These results are another indication about business conditions around the world. The stock gained 54¢.
McDonald’s August Same-Store Sales Rise 3.7%
McDonald's (MCD)
Photo: Bloomberg
The US trade deficit widened in Jul for the first time in 4 months as the global economic slowdown reduced demand for American-made goods. The gap grew 0.2% to $42B, smaller than projected, from a revised $41.9B in Jun, according to the Commerce Dept. The forecast called for a $44B deficit. Exports fell by the most since Apr, outpacing a decline in imports that reflected cheaper petroleum. A stagnant Europe & weaker economies in emerging markets such as China may be starting to sap demand for US products, a source of strength for the expansion in Q2. At the same time, a rebound in crude oil prices may lead to a higher American import bill. This is another negative for the US economy.
Trade Gap in U.S. Widened to $42 Billion as Exports Fell
The news was clearly negative, but that didn't hold back the bulls. They are hoping for another kind of a bailout by the Federal Reserve (FED) at the FOMC meeting. Even if there is a move, it may not help markets which are already discounting it. The trade data was glum. Maybe a credit downgrade for the US won't matter since US debt is still seen as a safe have for nervous investors. But it still would represent a kick in the head. Dow is within 70 of making a new high for 2012, although that may not be a critical ceiling.
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