This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

U.S. Downgrade in Focus for Coming Week

Stocks in this article: KNDMGMDISBSFTMKKSJCPMWSATTWO

NEW YORK ( TheStreet) -- The stock market will contend with multiple global economic concerns next week, but Standard & Poor's late Friday downgrade of the U.S.'s credit rating likely will top the list.

The ratings agency cut the U.S.'s long-term sovereign credit rating to double-A-plus from triple-A, the first time the U.S. has had its rating downgraded.

S&P said it made the decision because the recent debt plan approved by U.S. politicians isn't sufficient to "stabilize the government's medium-term debt dynamics."

The agency added that the downgrade broadly reflected that "the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011."

How the markets react to the news Monday is a matter of debate. Some investors have warned that pension funds with requirements to hold triple-A-rated assets will have to sell their Treasury holdings, which will cause bond yields to surge.

> > Bull or Bear? Vote in Our Poll

But Marilyn Cohen, president of Envision Capital Management, says the market may have priced a downgrade in already and that the bond market will greet the downgrade news with a yawn.

"We're the deepest and the largest bond market around," she says. "Investors feel we're money-good, there's no question about that. As long as you have the illusion that you're money-good while you're borrowing 40 cents on the dollar, nothing will change."

>> Keep the stock market at your fingertips with TheStreet's iPad app.

Stocks, which retreated from an early afternoon rally Friday as rumors swirled that a downgrade was coming, already may have factored at least some of the news into prices, others said.

"We could wake up on Monday morning and see the futures down precipitously, but I want to believe some of this was priced into the market," says Matthew Rubin, director of investment strategy with Neuberger Berman.

Before word of the downgrade hit markets Friday, investors were already on heightened global watch as they faced the coming week.

Growing concerns about the state of the U.S. economy boiled over this past week, helping to send all three major U.S. equity indices down at least 5%, as Wall Street pondered whether even the sluggish growth seen so far in 2011 can be sustained.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs