S&P rating change causes U.S. stocks to waiver

TradingPub Admin | June 10, 2013

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The announcement made by credit ratings agency Standard & Poor's on June 10 that it was upgrading the credit outlook for the U.S. and the subsequent changes that happened in equities represent a perfect example of such information.

The company boosted its credit outlook for the world's largest economy to stable from negative before trading started on that day, and the announcement caused the benchmark S&P 500 Index to rise 0.1 percent to 1,645.30 at 12:40 p.m. EST, according to Bloomberg.

In making its decisions, Standard & Poor's noted that the nation's financial risks are lower than they were before, the media outlet reports. The Dow Jones Industrial Average, another key group of stocks, was also having a good day, trading 0.1 percent higher at 15,257.91. 

This index changed direction and dropped slightly, trading down 0.1 percent later in the afternoon at 15,234, according to MarketWatch. At the time, 18 of the of the 30 securities contained in the Dow were lower. These fluctuations happened after the index surged more than 200 points on June 7.

Federal Reserve speculation persists
Another key variable you should know about if you want a good sense of how the news impacts asset markets is the decisions of the Federal Reserve in terms of economic stimulus.

While the organization is currently buying $85 billion worth of debt-based securities every month, there is significant speculation surrounding if and when this regimen of purchases will change.

Statements have been made by various voting members of the Federal Open Market Committee related to when the organization will make adjustments to the amount of assets being bought on a regular basis.

Bullard's speech
One of these key communications was recently made by James Bullard, president of the St. Louis Federal Reserve, who noted that the existing program of bond purchases could potentially be continued given the existing inflationary pressures, according to Bloomberg.

Even though "labor market conditions have improved since last summer," he stated in remarks prepared for a panel discussion, "surprisingly low inflation readings may mean the Committee can maintain its aggressive program over a longer time frame," the media outlet reports.

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