EmailPresident Obama and House Speaker Boehner took to the airwaves in primetime last night to express their respective positions on how to deal with the debt ceiling and the budget deficit. Several thoughts popped into mind while listening to their remarks.
The first thought was that their appearances were equally pathetic on the political scale. The second thought was that both men were firm on the point that the U.S. cannot default on its debt. The latter view notwithstanding, their finger pointing and blame game didn't do much to dispel the idea that we will likely go to the eleventh hour before a compromise is reached.
The key we suppose is that the market is still holding out hope that a compromise can be reached.
Confidence has been shaken a bit in recent days, however, so no one is making any concerted bets at this juncture. On a related note, the Consumer Confidence report for July (Briefing.com consensus 56.0; prior 58.5) will be released at 10:00 a.m. ET along with the New Home Sales report for June (Briefing.com consensus 320,000; prior 319,000).
We are witnessing the guarded approach to things in the low volume totals and the inconsistent trading pattern of the broader market.
After a down day yesterday, the market is indicated to open slightly higher today. If the political leaders will stay at the negotiating table and off the airwaves, there is a good chance the market may just close higher too.
The bulk of the earnings reports since yesterday's close have been better than expected, although Netflix (NFLX) is taking it on the chin for providing disappointing guidance.
Still, companies like Ford (F), 3M (MMM), UPS (UPS), Hershey (HSY), and Lockheed Martin (LMT) all topped estimates and either reaffirmed or raised their outlook.
The earnings results have been a helpful and distracting factor for the market, which has been preoccupied largely with macro issues.
The biggest issue of all at the moment is the debt ceiling negotiation. Its importance is magnified not just by the understanding that the debt ceiling needs to be raised so the U.S. can meet all of its obligations on time, but also by the understanding that simply raising the debt ceiling for a short time may not be enough to placate the ratings agencies.
The market, therefore, is waiting on a complete solution that will temper concerns about a downgrade to the U.S. debt rating that would introduce a new, negative element into the trading mix.
For now, it remains a touch-and-go market.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is the Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial please email researchsales@briefing.com.
