Good morning traders!
The S&P 500 ($SPY) is trading below Friday’s close. Let’s get into it…
U.S. stock futures decline this morning after Moody’s Investors Service’s decision to downgrade the U.S. credit rating outlook from stable to negative. This downgrade was attributed to the country’s substantial fiscal deficits and the ongoing partisan gridlock in Washington. Despite this, Moody’s maintained the U.S. credit rating at AAA, the highest level. This decision echoes a similar move by Fitch three months earlier, which lowered the U.S. long-term foreign currency issuer default rating due to concerns about fiscal deterioration and political standoffs.
The implications of this downgrade are significant, particularly in terms of foreign investment attractiveness. Jay Hatfield, CEO at Infrastructure Capital Management, emphasized that the downgrade reflects a broken budget process in the U.S., impacting the confidence of global investors. This comes at a time when the U.S. stock market had been experiencing gains, with the S&P 500, Dow, and Nasdaq all showing positive growth in the preceding weeks. The market’s reaction to this downgrade is being closely watched, especially as it coincides with a series of important economic data releases.
Investors are now focusing on upcoming economic reports, including the October federal budget and consumer expectations survey from the Federal Reserve Bank of New York. Additionally, remarks from Fed Governor Lisa Cook and the release of the consumer price index data are anticipated. These reports are expected to provide insights into the current economic climate, particularly in light of recent interest rate hikes and inflation pressures.
Moreover, consumer spending, a key driver of the economy, showed signs of pulling back in October. According to the National Retail Federation, sales excluding autos and gas slightly declined. This monitor, which is based on actual sales data from billions of credit and debit card transactions, offers a more immediate view of consumer spending trends compared to traditional survey-based reports. The upcoming week’s economic data, including retail sales and industrial production reports, will be crucial in shaping market expectations and investor sentiment in the context of these recent developments.
Monday Economic Events:
3 and 6 Month Bill Auction 11:30am ET
Treasury Statement 2:00pm ET
Fed Speaker Scheduled:
Lisa Cook 8:50am ET
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