Credit rating agency Standard & Poor's on Monday upgraded its credit outlook for the United States government to "stable" from "negative," saying the "likelihood of a near-term downgrade of the rating is less than one in three."
In August 2011, S&P had downgraded the U.S. credit rating from top-rated "AAA" to "AA+," the second highest rating, and had left the U.S. credit outlook at "negative" at that time.
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OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON D.C.:
"The revised rating is positive news for the dollar but I do not see it being a major catalyst. This is just the latest indication that we are seeing a broad stabilization and improvement in the economy and ultimately the government's fiscal position is improving, albeit slowly. This is undoubtedly encouraging news but will likely not spur a sharp rally."
HUGH JOHNSON, CHIEF INVESTMENT OFFICER OF HUGH JOHNSON ADVISORS LLC IN ALBANY, NY:
"Frankly, the markets don't put a lot of weight on the S&P's evaluation of the credit-worthiness of the U.S. government. They haven't and I don't suspect they will. This might psychologically give the markets a very short term lift, but I don't think anybody really believes the ability of the federal government to pay its bills is anything but stable and the appropriate credit rating for the U.S. government is AAA. I don't mean to demean S&P, but I don't think this is a market mover. The markets and investors believe the credit rating of the Federal government should be AAA and stable, and I don't think this is going to change that."
LOU BRIEN, MARKET STRATEGIST AT DRW TRADING:
"On the margin I think it's of note, I don't think it's something to base a trade on. We did though get a slight pop in stocks, and as a result a slight downtick in bonds."
CAMILLA SUTTON, CHIEF CURRENCY STRATEGIST, SCOTIA CAPITAL, TORONTO:
"This should have a limited impact on the dollar because we were not expecting a downgrade anyway. This is more or less a reflection of the stronger-than-expected decline in the deficit and a growth outlook that hasn't been hit as negatively as expected with the sequestration. But overall, I don't think this would have any impact on Fed tapering."
JACK ABLIN, CHIEF INVESTMENT OFFICER AT BMO PRIVATE BANK IN CHICAGO:
"At the margin it probably gives the Fed a little more opportunity to continue its quantitative easing program. I don't know how much of a consideration an S&P outlook rating is for the Fed but I think just to have an improving headline offers them some political cover.
"For the markets in general, it's probably not going to be enough to necessarily move the needle.
TODD SCHOENBERGER, MANAGING PARTNER AT LANDCOLT CAPITAL IN NEW YORK:
"This is great news, and good to hear, but Wall Street traders don't put a lot of emphasis on rating agencies. This may raise eyebrows, but it won't have a big impact on rates or anything else. Realistically this will just have a short-term impact. I don't expect the rise in futures to hold, but stocks are attractive right now and there aren't any real negative headlines."
TIM GHRISKEY, CHIEF INVESTMENT OFFICER OF SOLARIS GROUP IN BEDFORD HILLS, NEW YORK:
"I think it's probably not a big surprise given the stabilization in a lot of the debt numbers. The strong stock market has created tax revenues, which is certainly positive, and the economy continues a slow but steady growth path, so while we continue to print money, the overall debt numbers have stabilized and I think that's what the S&P is reflecting."
YELENA SHULYATYEVA, ECONOMIST AT BNP PARIBAS IN NEW YORK:
"The fiscal situation has turned better with the one-time payment from Fannie Mae. We also have higher-than-expected tax revenues but that could be one-time event with people paying their taxes late last year in anticipation of the tax increases this year. I don't expect the Washington politicians will reach any grand bargain in the near future to further help the country's fiscal situation. They'll kick the can the road"
STOCKS: U.S. stock index futures added to gains
BONDS: U.S. bond prices fell
FOREX: The dollar extended gains versus the yen and the euro
(Americas Economics and Markets Desk; +1-646 223-6300)