1:30pm (EST)
Futures were pointing towards a slightly lower market when we released this morning’s update but things got even worse shortly after we sent it out. Before the opening bell. Standard & Poor’s lowered the U.S. debt outlook from “Stable” to “Negative” while reaffirming the country’s “AAA” debt-rating. This sent shock waves through Wall Street and futures tanked on the news.
The bulls were floored as it basically means there is a one-in-three chance the AAA rating could be lowered within the next two years. This was not good news for the government which released a statement saying that the S&P’s information was compiled prior to the release of the latest employment and GDP numbers, and that the economy is in better shape than before.
Well, we can’t say we aren’t surprised because somebody needed to tell the truth.
The talking heads are panicking and seemed confused on the downgrade but they have been out of the loop for a while. Gold and silver rallied on the news. Gold has traded up to $1,500 an ounce while silver has topped $43 an O on the market’s 2% plunge.
The Dow is down 216 points, or 1.8% to 12,125 while the S&P 500 is lower by 21 points, or 1.6%, to 1,298. The Nasdaq is showing a decline of 49 points, or 1.8%, to 2,715. All three indexes are testing the near-term support levels we went over this morning.
This week is big for earnings as they hit second gear but today’s S&P downgrade has overshadowed any good news that is being reported. As far as the bad, Citigroup (C, $4.47, up $0.05) said it earned $3 billion, or $0.10 a share, versus $4.4 billion, or $0.15 a share, in the year ago period. Revenue came in at $19.7 billion. Although it was the company’s fifth-straight quarterly profit, revenues dropped as they incurred higher compensation and legal costs.
Analysts were looking for profits of $0.09 a share on revenue of $20.8 billion. Despite the revenue miss, shares are trading slightly higher today. Remember, on May 6, Citigroup plans to do a 10-for-1 reverse stock-split which will reduced its outstanding shares from 29 billion to less than 3 billion.
We have a lot of news to cover in our Members Area but watch the 1,300 level for the S&P 500. If the index closes below this level, the bears could take a shot at the March lows of 1,250. Subscribers, check for the updates.
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