Most market observers believe debt ceiling will be raised

With less than two weeks until the August 2 deadline for raising the debt ceiling, investor focus has been glued to the debate. Lawmakers have been negotiating ways to cut spending and raise the nation’s borrowing limit for months, but there is still no articulated path forward. Treasury Secretary Timothy Geithner said Sunday on CNN's State of the Union, "We're almost out of runway. We're not nowhere, but we're almost out of runway." In the days ahead, markets around the world will be looking for reassurance that the U.S. political system can compromise on solutions for the greater good.

Helping to balance uncertainty in Washington, last week was one of surprisingly positive earnings reports that lifted major indexes to weekly gains. The Dow rose more than 1% and the S&P 500 and Nasdaq more than 2%. Analysts also cited relative progress on both the U.S. debt ceiling issue and the ongoing European debt crisis as partial reasons for the positive results.

This week promises to be a busy one both for stocks and economic reports.180 companies in the S&P 500 are scheduled to report quarterly financial results; the August 2 deadline for raising the debt ceiling is rapidly approaching; and Friday will bring the first official report on second-quarter economic growth.

With everything featured in the headlines right now, we understand that you may have some concerns about how your investments could be affected. Please rest assured that we are closely monitoring all relevant activity and will keep you informed about any steps that need to be taken. At the same time, we would like to reiterate that we do not believe now is the time for drastic action. If you have questions or would like additional information, please feel free to contact us. We are always here to lend a hand.

Data as of 07/22/2011 1-Week YTD 1-Year 5-Year 10-Year
Standard & Poor's 500 2.19 6.95 23.0 1.69 1.11
Dow 1.61 9.53 22.9 3.34 1.99
NASDAQ 2.47 7.76 27.3 8.30 4.09
MSCI EAFE 3.44 5.38 21.5 1.95 3.49
10-year Treasury Note (Yield Only) 2.91 NA 2.93 5.05 5.11

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. NA means not available.

HEADLINES:
The dollar fell as U.S. lawmakers failed to agree on raising the nation’s $14.3 trillion debt ceiling. America’s currency weakened against the Swiss franc, yen and euro.

Investors outside the U.S. own $4.51 trillion in U.S. Treasuries, or about 50% of the marketable government debt outstanding, according to the Treasury Department.
Last week marked the first anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank’s crucial innovation was to identify sources of systemic risk in the banking system, and to provide regulatory tools to lessen the problem.
A year after the bill became law, it still has many critics and champions.

Two coordinated terror attacks in Norway have left at least 92 dead. Flags are flying at half-staff and the Army is patrolling the streets in a city that just endured its worst peacetime attack in history. Our thoughts are with them.