Standard & Poor's comments fail to impress US brokers

The Standard & Poor’s ratings agency said yesterday it is getting more optimistic about the US economy – but investors just yawned.

Stocks nudged higher when trading opened, shortly after the S&P agency raised its outlook for the US government’s debt rating and credited “the strengths of the economy”.

But the gains proved both modest and fickle, and the market spent most of the day flitting between small gains and losses.

At day’s end, the Dow Jones industrial average and the S&P 500 were lower, but just barely. The Nasdaq composite was slightly higher.

It was a marked change from Friday, when the Dow jumped 207 points after a jobs report that investors viewed as positive.

Trading volume was light, and there were no major economic reports or company announcements.

The 10 industry sectors in the S&P were split down the middle, with half rising and half falling, but none moved dramatically.

The best performer, telecommunications, was up 0.8%. The worst, consumer discretionary, was down 0.3%.

The Dow closed down 9.53 points at 15,238.59, a loss of 0.06%. The S&P 500 index was essentially flat, falling 0.57 point to 1,642.81, or 0.03%. The Nasdaq composite edged up 4.55 points to 3,473.77, a gain of 0.1%.

Booz Allen Hamilton slid after a company employee said he had leaked information about secret government surveillance programs. The consulting company’s stock dropped 2.6%, to 17.54 dollars.

S&P cited the Federal Reserve’s willingness to keep interest rates low, which is meant to spur borrowing and spending, and its bond purchasing programme, which is meant to encourage investors to buy stocks and other riskier assets.

S&P also noted approvingly that Congress had agreed to raise some taxes this year, notably the Social Security tax that most workers pay, which has helped shrink the government’s budget deficit.

Ed Butowsky, managing partner of Chapwood Investments in Dallas, said that the unemployment rate is still too high, economic growth too weak and the government’s budget deficit too heavy for the economy to be considered healthy.

“It defies economic logic as to why the S&P did this,” he said. “We continue to print money, we continue to spend money. What are they looking at?”

Others agreed with the S&P’s assessment, but said it was old news.

Jerry Webman, chief economist at OppenheimerFunds in New York, thinks the economy is strong enough to drive sustainable earnings growth, but not so strong that the Fed might pull the plug on its stimulus measures – a sentiment that seemed to drive Friday’s rally.