Moody's Own Cautious Outlook

Moody?s Corp. (MCO) has a solid franchise in the rating of debt instruments, and has diversified itself with credit research and international growth. This has helped the New York-based company offset declining ratings revenues, which fell 35% in the first half of 2008. However, Moody?s still remains cautious about the recovery in the credit market for the remainder of the year.

The current credit crunch is impeding the U.S. economy, which may likely experience a recession as consumer confidence declines. The Federal Reserve has cut rates, however, many people have been shut out of the mortgage market and investors in subprime debt have dried up. Moreover, with inflation concerns, rates are likely to rise from current levels.

Although debt markets will likely be slow to recover, comparisons will become easier in the fourth quarter, as Moody?s reaches the one-year anniversary of the current credit crisis. The company achieved its targets for the second quarter and re-affirmed full year guidance, leading us to believe further downside is limited. We therefore maintain our Hold rating on the shares and lower our target price to $31.

U.S. Steel Downgraded to Hold

Pittsburgh, PA-based United States Steel Corporation (X) is a leading steel manufacturer in the U.S., and the 5th largest worldwide. It produces and sells steel mill products in North America (72% of revenue) and Europe (28% of revenue). U. S. Steel has global annual raw steel production capacity of 31.7 million net tons.

The company's volume growth will be buoyed by capacity expansion in Europe, which is showing favorable demand trends. However, rising supply from China, low demand from the automotive and residential sector and rising commodity and labor costs lead us to downgrade the stock to a Hold with a six-month target price of $65.00.

We are also concerned about cost-side pressure emanating from higher coal and iron ore prices and the recent surge in scrap costs. While coal prices are still at an elevated level due to higher demand from utility and steel companies, scrap costs have started increasing from past low levels. Rising raw material costs are likely to put pressure on near-term margins.

Canadian Solar Growing Stronger

Canadian Solar, Inc. (CSIQ) engages in the design, development, manufacture, and sale of solar module products (ranging from 5-watt to 300-watt and using both polycrystalline and monocrystalline solar cells) that convert sunlight into electricity for various uses. The company was incorporated by Dr. Shawn Qu in Canada in 2001.