Stock to face more selling pressure

US stocks are likely to face more selling pressure next week as the Tuesday deadline draws near for raising the US debt ceiling and Washington remains paralysed by political brinkmanship. Anxiety over the debt crisis sent the S&P 500 lower for five straight days, resulting in the worst week and month for the benchmark index since August. The CBOE Volatility index, Wall Street's "fear index," rose more than 40 per cent for the week, its biggest jump since early May. With four days before the United States loses its ability to borrow, US President Barack Obama on Friday told Republicans and Democrats to stop bickering and find a way "out of this mess". Article continues below "Right now, overall the market is being totally driven by the debt situation, whether it is in Europe or the US," said Rick Bensignor, chief market strategist at Dahlman Rose in New York. The deadline for raising the US debt ceiling has investors on edge. Volatility, currently at its highest since the earthquake in Japan, can be expected to increase as time runs out. Recent slide "You've got individual stocks that can make significant moves but the market itself collectively is being pushed and pulled by every headline and how the wind is blowing out of Washington at any given moment." The recent slide has also put stocks in a precarious position from a technical perspective as the S&P 500 index moves closer to its 200-day moving average, a level which could bring about additional selling if the index breaks below it. he benchmark index successfully bounced off the level on Friday after the early morning decline. "That is the line in the sand that really divides things going maybe bad — to things really turning bad," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "If we take that out next week — man, I'm not neutral, I'm short." Even if a deal is struck, the possibility remains the United States could lose its prized triple-A credit rating if the terms are not stringent enough to satisfy credit rating agencies. "You are definitely going to get the downgrade by S&P," said Ken Polcari, managing director at ICAP Equities in New York. "You are still waiting on what the ultimate deal is going to be and it's just not going to be what everybody expects, so you are going to see disappointment in the markets." Investors can still find some solace in corporate earnings. According to Thomson Reuters data through Friday, of the 327 S&P 500 companies that have posted earnings, 73 per cent have reported results higher than analysts' expectations.