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Market Preview: Stocks Still Waiting on Washington

NEW YORK (TheStreet) -- The debt-ceiling drama drags on with every day bringing the United States closer to a default that seemed unthinkable mere months ago.

A contributing factor to the gridlock appears to be the Tea Party contingent that was swept into the House of Representatives in November's mid-term elections. The latest reports are that House Speaker John Boehner (R., Ohio) is having a difficult time persuading his fellow Republicans to support his plan, casting even further doubt on how the situation can hope to be resolved in time.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, warns that this splintering could have serious consequences for the fragile economic recovery.

"The Speaker is in office, but not in power, because the Tea Partiers do not respect party discipline," he writes in a research note late Tuesday. "They argue that they are standing up for principle, but the principle they have chosen to defend is the idea that the only thing that matters is rapidly and substantially shrinking the government. This, we respectfully submit, is nuts."

Shepherdson goes on to say that premature fiscal tightening is "extremely dangerous" in the wake of a financial crisis, and argues that now isn't the appropriate time to have the debate about how big the U.S. government should or shouldn't be.

"The U.S. has thus far done relatively well in terms of the growth recorded since hitting bottom in 2009, and the key reason for that, we believe, is the fiscal support provided by the 2009 stimulus bill and other measures," he writes. "To throw that lever into reverse now, before the recovery is fully established, makes no sense."

Wall Street still seems relatively calm about how all this is going to ultimately play out but the stock market also tends toward violent swings once panic sets in. The selling in the past few sessions may simply be some nervous Nellies leaking out the door but the exits will be get awfully crowded awfully quick if the situation deteriorates much further. What the exact trigger might be remains to be seen.

Wednesday's got a light economic calendar with the Mortgage Bankers Association weekly volume survey set for 7 a.m. ET, durable goods orders for June due at 8:30 a.m. ET, crude inventories for the week ended July 23 crossing the wire at 10:30 am ET, and the Federal Reserve's Beige Book, a compendium of anecdotal evidence of economic conditions across the country, for July arriving at 2 p.m. ET.

The earnings continue apace, led by Dow component Boeing's (BA) report before the opening bell. The plane maker is expected to post a profit of 97 cents a share in the June period on revenue of $16.51 billion, according to Thomson Reuters. Despite a 1.6% pullback on Tuesday, Boeing shares are still up 9.3% so far in 2011, so Wall Street seems to be expecting a seventh consecutive upside surprise.

The rest of the a.m. roster features Aetna (AET), BankUnited (BKU), Barclays Bank (BCS), ConocoPhillips (COP), Corning (GLW), Delta Air Lines (DAL), Dow Chemical (DOW), Dr. Pepper Snapple Group (DPS), General Dynamics (GD), Hess Corp. (HES), Legg Mason (LM), Moody's Corp. (MCO), Nasdaq OMX Group (NDAQ), Northrop Grumman (NOC), PF Chang's China Bistro (PFCB), Tupperware (TUP), Wellpoint (WLP), and Wyndham Worldwide (WYN).

Notable names delivering their numbers late Wednesday include Akamai Technologies (AKAM), BMC Software (BMC), Citrix Systems (CTXS), Crocs (CROX), DryShips (DRYS), Green Mountain Coffee Roasters (GMCR), Sealed Air (SEE), Visa (V) and Whole Foods Markets (WFMI).

A big weight on the action in tech Wednesday is likely to be Juniper Networks (JNPR), which missed Wall Street's profit and revenue expectations for its second quarter after Tuesday's close and gave a below-consensus forecast for the third quarter. The news weighed on the company's fellow networkers in after-hours action with both Cisco Systems (CSCO) and Ciena (CIEN) taking hits.

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