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Entries in Standard & Poor (4)

Monday
Oct312011

October Is Still on Track to Be Strongest Month

Comstock/Thinkstock(NEW YORK) -- So far this month, the Standard and Poor’s 500 stock index has gained 13.6 percent. This means October is still on course to be the strongest month for the major averages in about 35 years.

Futures are down this morning, and the markets are expected to open lower.

But October has been anything but a scary month for investors. Europe’s debt deal helped raise investors’ hopes, despite many concerns about the details of the agreement. Earnings are also up: So far, 70 percent of large corporations that have reported have beaten third-quarter profit estimates.

Copyright 2011 ABC News Radio

Saturday
Aug062011

5 Easy-to-Understand Effects of the S&P Downgrade

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- So it's happened -- right or wrong: a downgrade of Uncle Sam's credit for the first time in history.

As the world waits for the Tokyo market to open at 8 p.m. on Sunday night, lots of people will be wondering what this means for the real economy and stock market. Here's a quick primer based on ABC News' extensive reporting on the possibility of a downgrade -- five easy to understand effects:

1. The interest rates the government pays to finance the growing national debt will almost certainly rise as a result of the downgrade. That increases the amount of money Uncle Sam has to spend each year on "debt service." General market discussions have turned on an increase in rates that would up the annual tally by about $10 in the short-term and go up to $75 billion in additional costs in the coming years.

2. The interest rates you and your employer pay will go up. Basic credit facilities -- like mortgages, student loans and credit cards -- are all at least loosely tied to the rates the government pays. A half a percent increase in mortgage rates could increase the total cost of the average traditional mortgage by $19K (on a $172K home). Businesses would have to spend more money to finance expansions. Costs for borrowed money goes up, effectively raising the price of anything you're not paying for with cash.

3. Needless to say, increasing costs for consumers and businesses tends to slow their economic activity. Some estimates put a downgrade like this as likely to shave 1 percent off GDP. This slowing certainly increases the risks that the U.S. will have a second dip into recession. It also means less tax revenue, so the potential for additional debt increases.

4. As the economy slows, expect the stock market to react. After all, investors buy shares to get a piece of growing profits. A slowing economy means profits grow less rapidly or go down. The relative value of a share of anything will go down. Some experts predict a downgrade could force stocks to sell-off by 6 percent to 10 percent in short order. That's another 1,100 points on the Dow.

5. A slowdown in economic activity also means less demand for workers. The non-partisan group Third Way has published estimates that a simple 0.5 percent increase in interest rates could erase more than 640,000 jobs.

Copyright 2011 ABC News Radio

Friday
Aug052011

US Expecting Standard & Poor's Debt Rating Downgrade

Scott Eells/Bloomberg via Getty Images(WASHINGTON) -- The federal government is expecting and preparing for bond rating agency Standard & Poor's to downgrade the rating of U.S. debt from its current AAA value, a government official told ABC News.  ABC News called S&P and was told "no comment."

Official reasons given will be the political confusion surrounding the process of raising the debt ceiling and the lack of confidence that the political system will be able to agree to more deficit reduction.

It remains unclear whether the bond rating would drop to AA+ or AA.

Last month, Standard & Poor's warned that the U.S. risked a downgrade to AA status if Congress did not lift the debt ceiling and reduce the total debt by $4 trillion over the next decade. It later toned down its warning.

S&P was the last of the major ratings agencies to comment about U.S. credit rating after the Senate passed an agreement Tuesday to raise the debt ceiling and avoid a default on U.S. debt, following passage in the House on Monday evening.

After the bill passed in the Senate, Moody's Investor Service affirmed its AAA rating on U.S. sovereign debt but lowered its outlook to "negative."

At stake in all this is not only interest rates the U.S. must pay on its $14.4 trillion debt, but a host of rates for consumers ranging from those on items from mortgages to car loans to credit cards.

A downgrade of U.S. debt likely will cause interest rates of all kinds to edge up and that would cost the U.S. and consumers billions of dollars.

Copyright 2011 ABC News Radio

Tuesday
Nov302010

Home Prices Across US Are Dropping, Index Shows

Photo Courtesy - Getty Images(NEW YORK) -- Home prices are falling in the biggest cities in the country, according to the Standard & Poor's Case-Shiller index of home prices.

The index of 20 cities found that prices slipped seven-tenths of a percent in September.  The hardest hit city was Cleveland, Ohio, where home prices slid three percent.

S&P Indices Vice President Maureen Maitland says it seems the housing recovery really hasn't taken hold yet.  "If you look at these numbers, the third quarter, and you look at them compared to what had been going on earlier this year, these are disappointing numbers," she says.  "Any boost that we had gotten in early spring now seems to be gone, and the momentum appears to be moving in a negative direction."

Maitland adds that although home prices are up about six percent since April 2009, these are disappointing numbers.  "At best, I think what we can say with the housing market right now is that they seem to have leveled off at the bottom," she says.

Several factors are to blame for the drop, according to Maitland, who says, "It really looks like there's just too much supply out there and not enough demand, and given the fact that the unemployment rate is still high above nine percent, there's really no economic recovery that's supporting a housing recovery."

Copyright 2010 ABC News Radio







ABC News Radio