Dow: 13,323 (+0.52%) S&P 500: 1,434 (+0.31%)
This wasn’t just any Tuesday and Wall Street observed admirably with 5 minutes of silence on the New York Stock Exchange before the opening bell, just blocks from Ground Zero. The MarketSnacks team will never forget and our headquarters were covered with enough vestiges of Old Glory to make Betsy Ross guffaw. Stocks floated directionless most of today but then eager anticipation of tomorrow’s major events drove stocks northward at the end of the day: 1st the German Constitutional Court is expected to rule that the Eurozone bailout program is legal and, 2nd, the Federal Reserve meeting could yield new stimulus measures (we’ll have you covered on the details of both mañana). Following some mixed econ data on the trade deficit & small businesses, along with an announcement from credit ratings agency Moody’s, investors bought back stocks after yesterday’s sell-off and the Dow finished up 69 points.
US trade deficit widens in July below expectations, small business confidence grows in August
The US International Trade Report highlights the difference in the amount of goods we export vs. import. Although today the Commerce Department reported that the trade deficit widened in July, it edged up notably less than expected. The drop in exports came mostly from the $2.6 billion decline in US industrial supplies sent overseas as the Chinese economy slows and the European economy stalls, limiting potential buyers of Made in USA goods. The National Federation of Independent Business (NFIB) index on small business optimism showed that owners of mom ‘n’ pop shops smiled bigger in August. Small business confidence grew thanks to an increase in that sector’s jobs (this could just a seasonal effect of caused by the summer’s neighborhood lemonade stands).
Moody’s threatens to downgrade the United States Government
When gross American debt held by the federal government hit $10 bil-sorry, trillion-in 2008, Moody’s credit ratings agency didn’t blink about maintaining the Aaa perfect credit rating for the US government. Since then the debt has risen to over $15 trillion, the floor of Congress looks more like the caged Octagon of a UFC battle than a legislative venue, and the debt continues to soar. Moody’s warned today that it would lower America’s rating if it didn’t agree on a long-term plan to decrease debt in 2013. On Jan 1, 2013 there are trillions in automatic spending cuts and tax increases set to go into effect that threaten to put us back into recession (dubbed the “fiscal cliff,” a massive contraction of fiscal policy harmful to the economy), which Moody’s would actually be OK with since spending would go down and taxes go up => lowering debt. But if these cuts/tax hikes send the US back into recession, the downgrade could still happen. Moody’s rival, S&P, already cut the US to AA+ from perfect AAA last year (equivalent to the same Aaa to Aa1 downgrade being considered by Moody’s right now – the debate on whose ratings grades are sexier than the other rages on).
- Day #1 of the 2-day Federal Reserve FOMC Meeting begins (Chairman Ben Bernanke will speak Thursday)
- The German Constitutional court rules on the legality of the euro-bailout
- Apple-palooza: The tech juggernaut is having a party and rumors are iPhone 5 is hosting
- A serving of US econ data: Wholesale Inventories and the monthly USDA Crop Report
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