Debt Ceiling Dilemma: U.S. Stocks Could Facing Beating This Week With No Debt Plan In Place

Investors could face a tough week with talks over the United States debt ceiling continuing with no solution in sight as both Republicans and Democrats refuse to budge on major selling points.

Some areas of the market have already shown weakness such as the S&P 500 index which saw its worse numbers in five weeks as investors have begun placing their assets in safer areas such as cash.

In the meantime many American company’s have had positive gains with 39 companies on the S&P 500 index posting results and 74% announcing earnings that beat Wall Street estimates despite a down week on the market.

According to MSNBC:

Companies in the index are forecast to show a 6.5 percent rise in profits over the second quarter of 2010 when all the reports are in.

For this week, the S&P 500 ended down 2.1 percent; the Dow fell 1.4 percent and the Nasdaq declined 2.5 percent.

According to Paul Mendelsohn, chief investment strategist at Windham Financial Services:

“The news flow next week dealing with the deficit issues and the political posturing that is taking place is going to intensify and is really going to drive these markets.”

“People are starting to get nervous about what they are seeing out there. For a portfolio manager — let alone an average investor — this is a treacherous market to be trying to position yourself in.”

Market conditions in the next week could go in several directions depending on reports on the housing market which will include June housing starts on Tuesday and existing-home sales numbers being announced on Wednesday. Also due is economic indicators for June and the Philadelphia Fed survey on manufacturing data in the Mid-Atlantic regions.

Regardless of indicators, investors are worried about future volatility for stocks with the debt ceiling question remaining unanswered.

Tommy Huie, chief investment officer of BMO Asset Management U.S. tells MSNBC:

“The more it drags out into Tuesday, Wednesday, Thursday or whatever, then we’ve got some serious issues. That will be an overhang no matter how good the financials come in terms of earnings reports next week.”