The lead story of the Wall Street Journal: “Market Nears Bear Territory.”
Good Tuesday Morning!
Driving the day: Moody’s Investors Service cuts Yonkers’ bond rating by two notches, down to Baa1, just three levels above “junk” status, and reduced Yonkers’ outlook to negative from stable (previously, the city’s bond rating had been A2, the sixth-highest investment-grade rating). In its report, Moody’s said that projected budget gaps through 2015 and unsettled collective bargaining contracts with city employees would continue to represent challenges for city government officials.
Two things of note to take from this news: (1) First, mayoral elections in less than a month, it presents brand new challenges to whoever takes over for Mayor Phil Amicone. Yonkers has been riding a hot streak as of late with its Ridge Hill development, waterfront development and activity around the County Center; this puts a bit of a damper on that. (2) Second, the report foreshadows more difficulties to come for many of the state’s municipalities, with Moody’s analysts pointing to the 2 percent tax cap, saying that they will continue to monitor the impact of the new cap on any municipal debt issuance.
Stock Outlook: European indicators are continuing to fall this morning, which means more bad news for U.S. stock indexes. Also, watch for a reaction to Fed Chairman Ben Bernanke’s testimony before Congress at 10 a.m.
As an aside, note that the stock market has been falling consistently on European woes and not on a perceived decline of U.S. companies’ values. Whenever Europe starts to turn itself around, U.S. markets will be poised for big gains with the currently undervalued state of many S&P 500 companies.
By the Numbers: 1.3% – as in, the increase in construction spending for the month of August, an encouraging sign given what we know about August job numbers. Notably, public construction spending rose 3.1 percent (with residential construction up 0.7 percent).
Small businesses that are hiring say the biggest challenge is finding qualified workers. In a survey of 133 executives who attended Inc.’s 500|5000 Conference (i.e., businesses that have posted strong growth numbers), 40 percent of those queried said that finding qualified workers was the biggest challenge, versus just 13 percent who cited the sluggish economy and 16 percent who cited difficulties securing capital. (Inc.)
IBM is targeting mid-sized acquisitions as it continues to post strong growth numbers, one executive told Bloomberg News. IBM recently passed up Microsoft Corp. as the world’s second-most valuable tech company behind Apple. (Bloomberg)
U.S. manufacturing index rises unexpectedly in September on strong gains in exports. (Bloomberg)
Fannie Mae knew of abuses, report says, citing a lack of oversight at the Federal Housing Finance Authority (the report was authored by the FHFA’s inspector general). (NY Times)
Sports Blink: With the Yankees on the brink of playoff elimination, A.J. Burnett will get the start in Game 4. Be sure to remove any sharp objects from the vicinity of the television…