Wall Street Breakfast: Full Faith And Credit

A deal over the debt ceiling was reached just over two months ago, but the political dysfunction in Washington and the growing debt burden still seems to be a concern. Fitch Ratings has downgraded the United States' long-term rating to AA+ from AAA, echoing a move made by S&P Global Ratings, which cut its rating for the U.S. in 2011 after a different government standoff. Fitch had placed America's sovereign status on watch negative back in May, but the bipartisan agreement to suspend the debt limit until January 2025 wasn't enough to calm its fears. Why credit ratings and agencies matter to investors. Key rating drivers: "The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management," according to Fitch. "In addition, the government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process [and] the GG (General Government) debt-to-GDP ratio is projected to rise over the forecast period, reaching 118.4% by 2025. These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade." How much is too much for the U.S. national debt?Treasury Secretary Janet Yellen said she "strongly" disagreed with the downgrade, calling it "arbitrary" and saying that Fitch relied on "outdated" data. Many of the measures that the ratings company uses, "including those related to governance," have "shown improvement over the course of the administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America's competitiveness," she declared. Stock futures declined following Fitch's decision, while the yields were volatile as investors assess the outlook for the $25T global Treasury market. Is the debt ceiling constitutional and has the U.S. ever defaulted? What to watch: It was only two weeks ago that President Biden created a team to assess ways to avert future standoffs over the country's debt limit. "Now that the latest debt ceiling crisis is behind us, it is necessary to explore all legal and policy options to prevent Congress from ever again holding hostage the full faith and credit of the United States," the White House statement said at the time. The working group, consisting of administration officials and no Republican members, is being led by White House Counsel Stuart Delery and National Economic Council Director Lael Brainard. (67 comments)

	Read in Browser
Top News Full faith and credit Getty Images A deal over the debt ceiling was reached just over two months ago, but the political dysfunction in Washington and the growing debt burden still seems to be a concern. Fitch Ratings has downgraded the United States' long-term rating to AA+ from AAA, echoing a move made by S&P Global Ratings, which cut its rating for the U.S. in 2011 after a different government standoff. Fitch had placed America's sovereign status on watch negative back in May, but the bipartisan agreement to suspend the debt limit until January 2025 wasn't enough to calm its fears. Why credit ratings and agencies matter to investors. Key rating drivers: "The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management," according to Fitch. "In addition, the government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process [and] the GG (General Government) debt-to-GDP ratio is projected to rise over the forecast period, reaching 118.4% by 2025. These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade." How much is too much for the U.S. national debt? Treasury Secretary Janet Yellen said she "strongly" disagreed with the downgrade, calling it "arbitrary" and saying that Fitch relied on "outdated" data. Many of the measures that the ratings company uses, "including those related to governance," have "shown improvement over the course of the administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America's competitiveness," she declared. Stock futures declined following Fitch's decision, while the yields were volatile as investors assess the outlook for the $25T global Treasury market. Is the debt ceiling constitutional and has the U.S. ever defaulted? What to watch: It was only two weeks ago that President Biden created a team to assess ways to avert future standoffs over the country's debt limit. "Now that the latest debt ceiling crisis is behind us, it is necessary to explore all legal and policy options to prevent Congress from ever again holding hostage the full faith and credit of the United States," the White House statement said at the time. The working group, consisting of administration officials and no Republican members, is being led by White House Counsel Stuart Delery and National Economic Council Director Lael Brainard. (67 comments)       Featured Here's how you can be a better investor with Premium Research shows that individual investors collectively underperform the stock market, because their decisions are often driven by emotions. We believe that as an investor you can do really well if you find opportunities based on 360-degree analysis - not hype. Seeking Alpha Premium's unparalleled stock coverage gives you the insights you need to stay ahead of the curve. With timely insights on stocks, ETFs, and more, you can track the investments that matter most to you. Plus, you can discover hidden gems and compelling new ideas with our exclusive stock ratings. Go Premium and experience its incredible value for yourself. Go Premium now Economy JOLTS The U.S. labor market appears to be cooling - albeit at a slow pace - as wage pressures subside, which could bode well for the Federal Reserve's fight against inflation. Job openings fell to 9.582M in June, compared to the 9.650M expected, marking the lowest level in over two years. The hires rate was little changed at 3.8%, the lowest since the pandemic started, while the quits rate slipped to 2.4%. On the other hand, ISM Manufacturing PMI remained in the contraction territory for the ninth straight month. "This is not supportive of a reacceleration in earnings growth that many equity investors are anticipating," said Interactive Brokers Senior Economist Jose Torres, adding that today's ADP jobs data and Friday's nonfarm payrolls report will provide a clearer picture. (5 comments)       Consumer Road to profit Uber (UBER) has finally reported its first-ever quarterly operating profit, but its stock fell 5.7% AH on Tuesday as concerns over the ride-hailing company's growth lingered. While gross bookings rose in Q2 and monthly active platform expanded substantially, Uber CEO Dara Khosrowshahi warned that rival Lyft (LYFT) was competing effectively on prices on an earnings call. "We think the U.S. is going to be a two-player market for some periods to come," he cautioned. Nevertheless, SA analyst Daan Rijnberk remains bullish, given Uber's "stellar" long-term outlook and large market share. That's despite the steep valuation of the stock, which has climbed 84% YTD. (28 comments)       Energy Emergency reserves The U.S. government has withdrawn its offer to buy 6M barrels of oil for the Strategic Petroleum Reserve as crude prices continue to rise amid tighter supplies. The Biden administration had released a record 180M barrels from the SPR in 2022 to rein in surging gas prices, and said it would replenish the reserve once prices are at or below $67-$72 per barrel. But U.S. crude prices just saw their best monthly gain in over a year and will likely rise further on account of fresh production cuts by Saudi Arabia and Russia. Moreover, the latest data showed a draw of 15.4M barrels of oil in U.S. commercial stockpiles for the week ending July 28. (5 comments)       Today's Markets In Asia, Japan -2.3%. Hong Kong -2.5%. China -0.9%. India -1%. In Europe, at midday, London -1%. Paris -0.5%. Frankfurt -0.7%. Futures at 7:00, Dow -0.3%. S&P -0.5%. Nasdaq -0.8%. Crude +1% to $82.14. Gold +0.6% to $1,989.70. Bitcoin +2.2% to $29,537. Ten-year Treasury Yield -3 bps to 4.01%. Today's Economic Calendar Auto Sales 7:00 MBA Mortgage Applications 8:15 ADP Jobs Report 8:30 Treasury Refunding Announcement 10:30 EIA Petroleum Inventories  Companies reporting earnings today » What else is happening... Caterpillar (CAT) jumps to record high after profit beats estimates. BP (BP) CEO denies overpaying for German offshore wind leases. Merck (MRK) raises guidance despite buyout impact on bottom line. Pfizer (PFE) reports 54% contraction in Q2 sales amid COVID cliff. Yellow Corp. (YELL) rallies as Apollo (APO) nears deal for bankruptcy loan. Starbucks (SBUX) comp sales disappoint as North America demand stalls. Altria (MO) sees profits rise even as U.S. cigarette demand wanes. AMD (AMD) earnings call: Execution on track, AI engagements surging. Pinterest (PINS) beats expectations for Q2 revenue, user growth. SPAC DWAC on watch amid auditor resignation and latest Trump indictment. Seeking Alpha's Wall Street Breakfast Podcast Seeking Alpha's Wall Street Breakfast podcast brings you all the news you need to know for your market day. Released by 8:00 AM ET each morning, it is a quick listen that you can put on as you get ready to start your working day.
Download Seeking Alpha for your Phone or Tablet Like Wall Street Breakfast? Try our other newsletters as well. This email was sent to you because you signed up to receive Wall Street Breakfast. If you do not want to receive Wall Street Breakfast emails, click here to unsubscribe. Sent by Seeking Alpha, 244 5th Ave, Suite 2705, New York, NY 10001