Fitch Ratings on Monday revised to negative the outlook on the United States' AAA credit rating after a Congress committee failed last week to agree on at least $1.2 trillion in deficit-reduction measures.
THOMAS SIMONS, VICE PRESIDENT AND MONEY MARKET ECONOMIST, JEFFERIES AND CO., NEW YORK
It doesn't look like the market moved on it. The downgrade, itself, won't come until 2013 per the report and this has been well known as a risk since the Congressional 'super committee' failure. The market is more focused on Europe, the Fed buying the long-end, and risk aversion heading into month- and year-end.
MARK VITNER, SENIOR ECONOMIST, WELLS FARGO, CHARLOTTE, NORTH CAROLINA
This does not surprise me at all as not a great deal has been done to improve the long term prospects for bringing down the deficit. Being a little more cautious ahead of a downgrade is instructive given what is happening in Europe. There is little prospect of a miraculous plan to come up with a way to reduce the deficit that would unite Democrats and Republicans and so this announcement makes sense.
WARD MCCARTHY, CHIEF FINANCIAL ECONOMIST, MANAGING DIRECTOR, FIXED-INCOME DIVISION, JEFFERIES & CO., NEW YORK
It confirms what is generally expected, and nothing is imminent. The biggest risk for another downgrade would be Congress undoing the sequester in 2011. Congress has a time-honored tradition of undoing budget fetters, but it is too early to get a handle on the strength of the 'undo the sequester' movement at the current juncture.
JIM CARON, HEAD OF INTEREST RATE STRATEGY, MORGAN STANLEY, NEW YORK
I don't think a downgraded outlook has much of an impact right now. When S&P did it in August it was the first time, and it was a ratings cut, so there was a lot more noise around that. This time around you've got Europe, the U.S., Asia, there is a whole bunch of things going on around the world and the U.S. going to negative outlook by Fitch isn't necessarily going to change the collateral requirements and haircuts requirements by banks or anything like that. I don't think it completely takes everybody by surprise, many people probably expected something like that. It's not having an impact in any discernible way in the markets.
MICHAEL YOSHIKAMI, PRESIDENT AND CHIEF INVESTMENT STRATEGIST, YCMNET ADVISORS, WALNUT CREEK, CALIFORNIA
What it shows is that Fitch is putting the U.S. on warning that this cannot go on forever. Eventually the debt is going to have to be dealt with, but the fundamental strength of the economy is still fine.
The markets already assumed this was going to happen. It would be different if it was a downgrade but a negative outlook is not the end of the world.
FRED DICKSON, CHIEF MARKET STRATEGIST, THE DAVIDSON COS., LAKE OSWEGO, OREGON
The affirmation of the AAA is fine. Putting it on a negative credit watch...that seems to be in concert with the other two ratings agencies, so I don't think we're going to see much of a market reaction. It's generally confirmation of what's been built into the market.
RAYMOND REMY, TREASURIES TRADER, DAIWA SECURITIES, NEW YORK
I think it's probably old news, because the other ones did it first. I don't think there will be much market reaction. I think it's very uninteresting.