Moody's Investors Service said it may cut the United States' triple-A rating due to the rising chance its debt ceiling is not raised.
KEY POINTS: * Moody's was the first among the big-three rating agencies to place the United States' Aaa rating on review for a possible downgrade, which means a negative rating action is impending.
JAY MUELLER, ECONOMIST & PORTFOLIO MANAGER, STRONG CAPITAL MANAGEMENT INC, MENOMONEE FALLS, WIS.
I'm a little bit surprised at the timing. I thought they would've waited a bit longer. They certainly gave everyone a heads up with their negative outlook a little while ago.
They've made little to no progress on resolving the issues. In a sense this is not new news. It's a recognition of an existing reality. This is a very long and slow moving train wreck that's been going on for many years, if not decades.
The rating agency is stating a reality. It's not a surprise to anyone who looked at the numbers.
DAVID SEMMENS, U.S. ECONOMIST, STANDARD CHARTERED, NEW YORK:
Moody's still sees a very low chance of default, but now sees this as no longer minimal. The rising possibility that the debt limit is not lifted is driving this concern. This will continue to place pressure on the negotiations going on in Washington daily. There is still no clear consensus. Furthermore, we would look for a convincing rather than a piecemeal solution, otherwise this will be a very temporary solution and we will be reliving this discussion sooner rather than later.
PAUL SCHATZ, PRESIDENT AND CHIEF INVESTMENT OFFICER, HERITAGE CAPITAL, WOODBRIDGE, CONNECTICUT:
The rating agencies were so slow to respond to anything in 2007 and 2008 that now they're overly quick to respond. I don't think this is a big deal and I don't think it will move the needle for long. This will be a short-term issue, no more than half a day. The way people are reacting to the debt ceiling issue you'd think we were in the middle of a tailspin. But the market is very resilient now, and it's taking all this in stride. There's no chance of a default. This is just a tiny hiccup.
BRIAN DOLAN, CHIEF STRATEGIST, FOREX.COM, BEDMINSTER, NEW JERSEY:
In the short-term, the dollar definitely has its problems. This ratings news sent the dollar tumbling. This is really not good. Moody's might be doing this based on the politics as much as the threat of default, because the politics have become so problematic. This game of chicken the two sides are playing goes on, the cars get closer together but nobody seems willing to swerve. Between this and (Ben) Bernanke talking about QE3, the dollar could be entering a new downward phase.
WARD MCCARTHY, CHIEF FINANCIAL ECONOMIST, JEFFERIES & CO., NEW YORK:
They've been threatening this for a while and they're just increasing the drumbeat. It's time for our elected officials to do what they were elected to do. This was a warning shot across the bow.
It means 'deer in the headlights' for the Treasury market. People don't know what to do, especially in this market, where safety is a top concern. If you can't hide in Treasuries, you don't know where to hide. It's just adding to uncertainty.
MARKET REACTION: STOCKS: U.S. stock index futures fell BONDS: U.S. bond prices fell and yields rose FOREX: The dollar fell against the euro and yen