For the week ended July 29, 2011

Week in Review: U.S. Congress remains divided over debt ceiling, spending cuts

• U.S. Congress remains divided over debt ceiling, spending cuts
• Search for safe havens boosts gold, sends dollar downward
• Second-quarter U.S. GDP confirms slow growth
• Spain on review for debt downgrade
• U.S. weekly jobless claims dip below 400,000
• U.S. durable goods orders, consumer confidence slip

The showdown in Congress over a deal to raise the U.S. government’s borrowing ceiling while cutting annual spending continued unresolved, with all parties digging in their heels. Looming largely is the August 2 deadline, which the U.S. Department of Treasury has designated as the date after which the U.S. government may no longer be able to meet all of its financial obligations. Even if lawmakers can meet the deadline, one of the major credit ratings agencies could downgrade U.S. debt.

A downgrade could affect interest rates, and still-struggling consumers and businesses could be squeezed. Among other possible consequences, hundreds of local governments and housing-finance programs could have their credit ratings downgraded. On Thursday, Moody’s Investors Service placed 177 top-rated municipal bond issuers on review for possible downgrades.

The recent search for safe-haven investments caused stocks to falter and the price of gold to spike. Some $9 billion a day has been withdrawn from money market funds this week, with a two-week outflow of $62 billion, according to Nomura Securities International. Ironically, the financial uncertainty pushed more investors into buying Treasuries, sending prices higher and yields lower. Major currencies rose against the dollar, including the Japanese yen, the Swiss franc, the euro, and the Australian, Canadian, and Singapore dollars.

Other economic reports were mixed. Although second-quarter U.S. economic growth was low, U.S. jobless claims fell below 400,000 for the week ended July 23, and home sales contracts rose in June. However, May home prices were flat, and U.S. consumer confidence reports offered conflicting indications, while consumer confidence fell in the eurozone and the United Kingdom.

Dunkin’ Donuts serves up IPO, coffee competition to heat up

The hunger for initial public offerings continued this week, with 11 IPOs, including an offering from Dunkin’ Donuts that raised $423 million, and will promote the franchiser’s growth.

Craig Barton 310-379-9621