[BRIEFING.COM] The S&P 500 lost 4% this week, and that move is primarily attributable to growing concerns about lawmakers ability to come to an agreement on the U.S. debt ceiling, and the subsequent downgrade of U.S. credit by one of the ratings agencies, which could materialize even if a debt agreement is reached.

We saw this uncertainty play out in various markets throughout the week, and the most striking result was the 45% increase in the VIX Volatility Index, which measures volatility expectations. The increase in the VIX illustrates a much greater degree of uncertainty about the market, and represents an increased cost of downside protection in the form of put options.

The flow of money into safer assets has also resulted in a 1.6% gain in gold prices to fresh all-time highs, as gold could be the ultimate safety shelter if things deteriorate elsewhere. Additionally, and perhaps surprisingly, U.S. treasuries found a bid this week, sending 10-year yields lower by 16 bps to 2.80% (yes, this is the debt that is at risk of being downgraded!). The bid in treasuries is another safety trade, because despite the current situation, there is little fear that treasuries will lose their standing as one of the most risk-free returns in the world.

There could be an extension of these moves in equities, volatility and gold if some sort of deal isn't reached by the August 2 deadline. As we've seen in the past, further selling in the stock market could become the catalyst to a compromise if one is not reached in due time. As such, this weekend will be a very important one in Washington, as the two sides of the aisle will presumably be working toward some sort of compromise.

Looking more closely at today's action, we're closing out the week on more negative headlines, with little concrete progress on the debt limit negotiations and a weak Q2 GDP reading, which came on top of a negative revision to Q1.

Despite the negativity, there were a few factors that have allowed the market to rebound from its pre-market lows. First, as the S&P 500 futures sold off in reaction to the GDP data, they managed to hold their 200-day moving average, which is a positive from a technical standpoint. Then, after holding onto to a modest recovery from the lows, the markets extended their bounce as headlines crossed newswires suggesting more Republican representatives are supporting the House bill, along with some details of a revised plan calling for short-term extension with a 2nd increase contingent on a Balanced Budget Amendment. The early bounce in the market likely involved some short-covering after the S&P 500 held its 200-day moving average, ahead of the possibility for a weekend deal.  

Earnings season progressed this week, and roughly 2/3 of the S&P 500 companies have now reported their results. Overall, the earnings results are surpassing consensus expectations, with about 2/3 of companies beating bottom-line earnings estimates, and a slightly higher proportion of companies beating the top-line sales expectations. One of today's biggest movers on earnings is storage company STEC (STEC 10.17, -6.53), which is -39% after reporting a disappointing quarter and issuing guidance that was well below expectations.

Additionally, online travel company Expedia (EXPE 31.69, +2.70) released earnings of $0.55 per share which topped the Capital IQ Consensus Estimate by $0.06, and hit an all-time high on today's pop of more than 12%. Revenues also beat forecasts, climbing 22.7% year over year to $1.02 billion. Gross bookings surged 19% versus the previous year with domestic bookings jumping 10% and international bookings surging 37%.

Shares of Starbucks (SBUX 40.09, +0.11) are one of the bright spots today after reporting better than expected earnings following yesterday's close. The company announced earnings per share of $0.36 which topped the Capital IQ Consensus Estimate by $0.02. Revenues for the third quarter rose 12.3% year over year to $2.9 billion ($2.84 billion consensus) while consolidated same store sales climbed 8%. In-line guidance for full year 2011 shows earnings per share of $1.50-1.51. The company plans to accelerate growth by opening approximately 800 net new stores globally in 2012.

Gold miner Newmont Mining (NEM 55.61, -2.12) is down close to 3.0% after earnings for second quarter fell short of estimates. The company announced earnings of $0.90 per share, excluding non-recurring items, which were $0.09 worse than the Capital IQ Consensus Estimate. Revenues rose 10.7% year over year to $2.38 billion, but missed the Capital IQ Consensus Estimate of $2.51 billion. The company's outlook for gold production during 2011 remains on track for the previously announced 5.1 to 5.3 million ounces.