The domestic picture is not so rosy, however. For the tenth consecutive quarter, the credit quality of US firms fell, with approximately half as many upgraded as downgraded (66 vs. 111). Moody's attributed this in part to slower domestic expenditures, higher prices for energy, staff and credit, fewer opportunities for exporting goods to Japan and Europe and a strong US dollar. Speculative-grade borrowers were hardest hit, with almost three times the number of downgrades (75) as upgrades (29).

"A more cautious outlook for the global economy is in order over the next year as a result of a less plentiful supply of financial capital and disappointing stock price performance globally, particularly in Asia," says John Lonski, the firm's chief economist. On the positive side, however, he notes that tax reduction efforts by European governments might encourage regional expenditures sufficiently to firm corporate debt protection.