The American Manufacturers Community is joining the 80th business anniversary celebration of one of our members "Valley Plating Works, Inc." The event will include a company tour, supplier expo, latest coating technology seminar, and FREE lunch.
http://www.industryteams.com/rsvp.html

Tumbling energy and materials stocks launched the markets to session lows, with the Dow sinking more than 200 points and the broad S&P 500 shedding 2.2%, as traders grappled with economic fears and a soaring greenback.

NEW YORK – The U.S. inched a step closer on Wednesday to having its coveted AAA rating lowered.

Moody's Investors Service said it placed the government’s AAA bond rating on “review for possible downgrade.”

Moody's Puts U.S. Ratings on Review for Downgrade

By Dunstan Prial

Published July 13, 2011

 FOXBusiness

NEW YORK –  The U.S. inched a step closer on Wednesday to having its coveted AAA rating lowered.

Moody's Investors Service said it placed the government’s AAA bond rating on “review for possible downgrade.”

The credit rating firm said it based its decision on the increasing likelihood that the U.S. could default on its debt obligations if Congress fails to reach an agreement to raise the U.S. debt limit before an Aug. 2 deadline set by the Obama Administration.

“The review of the US government’s bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes. As such, there is a small but rising risk of a short-lived default,” Moody’s said in a statement.

Moreover, Moody’s warned that it’s looking for a long-term solution to U.S. debt woes. Once its review is completed, any new potential rating will depend on whether a “substantial and credible agreement is achieved on a budget that includes long-term deficit reduction.”

The review and possible downgrade warning didn’t come entirely by surprise. In June Moody's said a rating review was likely unless “meaningful progress” had been made in negotiations to raise the debt ceiling.

Apparently, they feel meaningful progress has not been made.

Congress has been battling for weeks over an agreement to raise the debt ceiling. Both parties have said no agreement can be reached without an accompanying plan to reduce the massive U.S. national debt, but the two sides can’t agree on how best to accomplish that.

The announcement has a domino effect that ripples throughout the global economy.

That’s because Moody's also placed on review for possible downgrade the AAA ratings of financial institutions directly linked to the U.S. government: they include mortgage giants and quasi government entities Fannie Mae and Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks.

In addition, Moody’s said it is reviewing certain housing bonds guaranteed by the government; various municipal ratings directly linked to the U.S. rating. Also, bonds issued by the governments of Israel and Egypt that are guaranteed by the U.S.

Moody’s said the likelihood of a default on interest payments remains low, but is no longer out of the question. Hence the review.

“An actual default, regardless of duration, would fundamentally alter Moody's assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate,” the ratings firm said in its statement.

Moody’s said any default would likely be brief and minimal in its impact to borrowers. Therefore the downgrade would likely be to AA rating. But if an agreement is reached and default avoided, the AAA rating “would likely be confirmed,” Moody’s said.

Moody’s said in its statement that it doesn’t care how the deficit is reduced as long as a plan is put in place to do it.

The Treasury Department responded to Moody’s announcement: “Moody’s assessment is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country's obligations and agree upon a substantial deficit reduction package.”

A spokesman for House Speaker John Boehner, (R-Ohio), issued the following statement: “As Speaker Boehner has warned for months, if the White House does not take action soon to address our nation’s debt crisis by reining in spending, the markets may do it for us. This action by Moody’s today reinforces the Speaker’s warning.”

Read more: http://www.foxbusiness.com/industries/2011/07/13/moodys-puts-us-ratings-on-review-for-downgrade/#ixzz1S1vmpNNa

Federal Reserve Chairman Ben Bernanke said on Wednesday the central bank is ready to ease monetary policy further if the economy weakens and inflation moves lower, suggesting policymakers are actively mulling further stimulus.

Federal Reserve Chairman Ben Bernanke said on Wednesday the central bank is ready to ease monetary policy further if the economy weakens and inflation moves lower, suggesting policymakers are actively mulling further stimulus.

"The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support," Bernanke said in testimony before the U.S. House of Representatives Financial Services Committee.

Tellingly, Bernanke specifically noted Fed forecasts for June, which were already revised down significantly from April, had not incorporated recent data, particularly last Friday's dismal employment report. That data showed job growth essentially grinding to a halt in the last two months, pushing the jobless rate up to 9.2 percent.

Minutes from the Fed's June meeting, released on Tuesday, showed some policymakers believe the Fed should stand ready to provide more support to the economy if the recovery flags, rekindling the threat of a debilitating downward spiral in prices and wages.

Others on the policy-setting Federal Open Market Committee, however, felt inflation risks might force the central bank to withdraw stimulus sooner than is currently anticipated.

Financial markets responded immediately to Bernanke's indication that the Fed could resume easing, with stock prices climbing strongly after his testimony was published.

But analysts pointed out that, while Bernanke was suggesting the Fed might add stimulus he also was saying that the current "soft patch" may prove temporary.

"The bottom line is that he has to say he will respond if needed, but it seems he's saying it more as lip service than anything because ultimately he still expects that this slowdown was temporary," said Tom Porcelli, chief U.S. economist for RBS Capital Markets in New York.

Bernanke did not mention two key issues that were likely to come up repeatedly during the question and answer session before lawmakers: The fight in Washington over the U.S. debt ceiling and a European debt crisis that appears to be getting worse by the day.

The Fed chief's outlook on the economy was cautious. After recovering from the steepest recession in generations beginning in the summer of 2009, the U.S. economy has lost momentum in recent months. Gross domestic product expanded just 1.9 percent in the first three months of the year, and the second quarter does not look to have been much better.

Bernanke held to the view that recent weakness was due in part to temporary factors like high energy costs and the effects on global industry from Japan's earthquake and tsunami.

But he acknowledged the labor market remains weaker than the Fed would like.

"The most recent data attest to the continuing weakness of the labor market," Bernanke said.

Lawmakers are likely to grill Bernanke on the effectiveness of the Fed's second round of bond buying, a $600 billion stimulus program just completed at the end of June. Bernanke argues in his testimony that the program was effective at keeping borrowing costs down and stimulating economic activity.

He said the Fed estimates round two of quantitative easing, or QE2, lowered long-term interest rates by between 0.1 and 0.3 percentage point, which Bernanke said would be roughly equivalent to a 0.40 to 1.20 percentage point decline in the federal funds rate, which is currently set in a range between zero and 0.25 percent.

Regarding inflation, Bernanke reiterated the recent rise in prices was mostly linked to transitory factors such as higher energy and commodity prices, and should trend back down.

Read more: http://www.foxbusiness.com/markets/2011/07/13/bernanke-hints-at-further-stimulus/#ixzz1S0oG8G3L