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A CALM SESSION - By WSS Research Desk

By Carlos Guillen

Equity markets are trading fairly flat so far into today's session after last Friday's rather encouraging jump of at least 1.3 percent in most indexes. While it is a slow day in terms of economic data, a couple of items shook stocks a bit, but as it stands the effects have been neutral.

Perhaps the most notable economic item today was that Standard & Poor's revised its credit-rating outlook for the U.S. to stable from negative. This move comes almost two years after the ratings agency cut its debt rating for the U.S. from AAA to AA+ on August 8, 2011. According to Standard & Poor's, the likelihood of a near-term downgrade is less than one in three; moreover the ratings agency also affirmed its AA+/A-1+ sovereign-credit ratings for the U.S. This affirmation of stability comes as the agency sees rather constant debt as a percentage of gross-domestic-product of approximately 84 percent in the next few years, giving the U.S. government more time to ameliorate its spending troubles.

The second item, serving to offset the upside provided by the S&P today, was that St. Louis Federal Reserve President James Bullard said that improved labor-market conditions suggest the Fed could slow the pace of bond purchases, but surprisingly low inflation means the Fed can maintain its aggressive program over a longer time frame. Clearly, investors are dissecting any comments that come from Fed officials, and this usually creates significant volatility in stock markets. In addition, after last week's rally on the "not so cold, not so hot" jobs data, investors are taking a look back and deciding whether the reaction was overdone.

So far the word on the Street is still mostly on the side that the Fed will continue its trajectory of bond purchases, so at least this should keep stocks from making any significant drops. But as we know, things can look totally different tomorrow.