Market Watch: "Uncertainty" Edition

Fiscal Responsibility

A look at the headlines show the markets are looking for certainty. But instead of working with Democrats on a long-term, balanced compromise to pay our bills, reduce the deficit and give certainty to our economy, Republicans are wasting time with their partisan, short-term Default Bill.

Reuters: Futures drop after vote delayed on debt deal

“U.S. stock index futures fell on Friday after lawmakers in Washington delayed a vote on a Republican proposal to raise the U.S. government's debt limit.”

“U.S. House of Representatives Speaker John Boehner's failure to round up enough votes for his plan late Thursday exposed a rift in the Republican Party that is hampering efforts to reach a compromise to raise the U.S. debt ceiling before a Tuesday deadline.”

“‘The fear factor of the debt ceiling crisis is becoming a major one as we near the deadline,’ said Peter Cardillo, chief market economist at Avalon Partners in New York. ‘There is a possibility that we might the test the 1,275 level on the S&P.’”

“On Thursday, the S&P 500 fell for a fourth straight day, closing near 1,300 as buyers kept to the sidelines while lawmakers struggled to hash out an agreement on the deficit and debt ceiling.”

Bloomberg: U.S. House Bids to Salvage Boehner Debt Bill

“House Republican leaders, four days before a threatened U.S. default and facing stiff resistance within their ranks to raising the U.S. debt ceiling, are planning to make a second try at passing legislation that is headed for a Senate roadblock.”

“As the House deadlocked, Senate Majority Leader Harry Reid said today he has asked Senate Republican leader Mitch McConnell to meet with him and ‘negotiate in good faith knowing the clock is running down.’”

“‘This is likely our last chance to save this nation from a default,’ said Reid, after speaking with Treasury Secretary Timothy Geithner about the impact of inaction. ‘Secretary Geithner says it’s already started,’ Reid said. ‘The international community is extremely worried.’”

“U.S. stocks fell, extending four days of losses. The Standard & Poor’s 500 dropped 1.1 percent to 1,285.79, its lowest level for the month, at 9:36 a.m. in New York. The Dow slipped 119.42 points, or 1 percent, to 12,120.69.”

CNN: Stocks falter on GDP and debt uncertainty

“Stocks fell Friday as investors were hit by a one-two punch of worse-than-expected economic data combined with a lack of progress on a debt deal.”

“The Dow Jones industrial average dropped 105 points, or 0.9%. The selling had been worse, with the blue chip index shedding as much as 156 points earlier in the session.”

“Investors were already unnerved after House Speaker John Boehner delayed a vote late Thursday on his plan to raise the debt ceiling.”

“‘It's been taken to the wire,’ said Philip Isherwood, equities strategist at Evolution Securities. ‘The expectation is still that something is sorted over the weekend.’”

AP: Stocks plunge on dismal economic growth and worries over Congress’ failure to end debt dispute

“The word of the day in financial markets appears: Anxious.”

“If Congress fails agree to raise the debt limit before Aug. 3, the U.S. won’t be able to pay all of its bills. The country might then default on its debt. Experts say that could be a disaster for financial markets and the broader economy.”

“‘I think there’s a growing sense of resignation that we could go into technical default’ and a downgrade of U.S. debt looks more likely, [Jack Ablin, chief investment officer at Harris Private Bank] said.”

“Traders flocked to bonds, considered to be a safer investment, pushing the yield on the benchmark 10-year Treasury note to 2.85 percent from 2.95 percent on Thursday. As demand for bonds increases, the government is able to pay bondholders lower interest rates, causing yields to fall. Concerns that bond yields could spike on fears of a default have so far been unfounded.”

“Gold rose about $10, or just under 1 percent, to $1,627 per ounce. Gold prices tend to rise when investors are nervous about turbulence in other markets.”

“A default by the U.S. could increase borrowing costs for the government and consumers. That could dig the nation into a deeper deficit hole and discourage people from borrowing to buy homes and cars.”

“Even if Congress does reach a deal, rating agencies might still downgrade U.S. debt, which would likely have the same effect on borrowing costs.”

“The dollar fell 1.5 percent against the Swiss franc as traders’ confidence in the reserve currency eroded.”