Wall Street flounders as the Standard & Poor’s credit outlook for the U.S. is reduced from “stable” to “negative” for its “AAA” rating and the CBOE MKT Volatility Index (VIX) jumpes over 20%.
The news isn’t that the rating is so low or the VIX so high, but rather, the trend they represent. S&P based its rating change on the U.S. deficit and the stalled political debate surrounding it. The fiscal situation will likely remain unresolved until after the 2012 elections and companies reported less then predicted earnings last week.
With the Dow down triple digits at the start of the week, and financial reports of companies such as Citigroup, Goldman Sachs, IBM, and Yahoo due this week, investors will be anxiously watching to decide which way to jump. If companies continue to deliver less then their expected profits, prior to the long Easter weekend, a stock dump may result.