Markets were up and down this week, struggling to find a definitive direction after the S&P 500 hit all time highs a week prior. As of midday on Friday, the S&P was set to come in slightly lower, which isn't that bad in a week that saw a negative GDP revision and higher than expected jobless numbers. Investors seemed to all but ignore the revised Q1 GDP figure that was released on Wednesday, which showed that U.S. gross domestic product had fallen by 2.9%, compared to the initial release of a 1.8% contraction. In other macro news, initial jobless claims came in at 312,000, just above the expected 310,000. Bolstering the markets with positive earnings releases this week were Nike (NKE), KB Home (KBH), Lennar (LEN) and Carnival Corp (CCL), while General Mills (GIS) and Walgreens (WAG) disappointed investors and analysts. In the bond markets, 10-Year Treasury yields were down this week, having started off the week at 2.63 and finished off Thursday at 2.53. Below, we look at Moody's municipal bond upgrades and downgrades from the past week.

Upgrades

• State of California: Moody's has upgraded the State of California to Aa3 from A1. The upgrade to Aa3 from A1 reflects the state's rapidly improving financial position, high but declining debt metrics, adjusted net pension liability ratios that are close to the state median, strong liquidity, and robust employment growth. The Aa3 rating also reflects the state's volatile tax revenue structure and governance restrictions, in addition to certain recent governance changes and proposals that are meant to address those longstanding issues.
• Ohio Air Quality Development Authority: Moody's upgraded the State of Ohio Pollution Control Revenue Refunding Bonds to Aa3/VMIG 1 from A2/VMIG 2. The long-term and the short-term ratings of the Bonds reflect the long-term and the short-term other senior obligations (OSO) ratings of the Bank as the provider of the letter of credit, and will be changed whenever the Bank's ratings are changed. Moody's currently rates the Bank's long-term and short-term OSO Aa3 and P-1, respectively.
• City of Central Falls, RI: Moody's upgraded this city to Ba3 from B1. The upgrade to Ba3 reflects the city's recent trend of favorable operating results following emergence from Chapter 9 bankruptcy in October of 2012 and transition to local control in April 2013 with an adopted six year bankruptcy plan which was accepted by a federal court. The bankruptcy process has significantly reduced the financial pressure related to growing employee salaries, pensions and healthcare insurance costs. The rating also incorporates Moody's expectation that the city has and will continue to make general obligation debt service payments, given the state law creating a priority lien for general obligation bondholders and the absence of challenges to the payments by other creditors.
• East Stroudsburg Area School District, PA: Moody's upgraded this school district to Aa3 from A1. The upgrade to Aa3 reflects the town's improved financial position following several years of growth in fund balance and cash reserves. The Aa3 rating also incorporates the district's stable, moderately-sized tax base, average demographic profile, and above average, but manageable, debt burden.

Downgrades

• Helen Keller Hospital, AL: Moody's downgraded this hospital to Ba3 from Ba2. The downgrade to Ba3 is attributable to deterioration in operating performance and cash flow through six months fiscal year (FY) 2014. The Ba3 rating further reflects several fundamental challenges Helen Keller faces, including the organization's small size and recent revenue declines, a challenging payer mix with one insurer comprising the majority of commercial insurance, and presence of sizeable competing hospital in the service area.
• Puerto Rico Electric Power Authority: Moody's downgraded this power authority to Ba3 from Ba2. Even if PREPA is able to address its immediate liquidity issues, the company faces continuing challenges over the next several years. These challenges include negative free cash flow, very high electricity rates accompanied by high rates of non-payment and growing receivables balances, and perceived constraints on raising revenues to fund a sizeable capital spending program needed to convert electricity generation from high cost oil to lower cost natural gas.
• Good Shepherd Medical Center, TX: Moody's downgraded to Aa3 from Aa2 the long-term joint support letter of credit backed rating of the Gregg County Health Facilities Development Corporation Variable Rate Demand Hospital Revenue Bonds (Good Shepherd Medical Center Project) Series 2004 (the "Bonds").
• Alamogordo Branch Community College, NM: Moody's downgraded this community college to Aa3 from Aa2. The downgrade reflects the recent declines in reserves and enrollment. The rating also incorporates the college's stable tax base that is modest compared to peers, below average socioeconomic profile, and minimal debt burden with rapid payout.
• Lisle-Woodridge Fire Protection District, IL: Moody's downgraded this fire protection district' outstanding general obligation limited tax notes to A1 from Aa3. Concurrently, Moody's has downgraded the district's issuer rating to Aa3 from Aa2. The Aa3 issuer rating reflects a recent trend of underfunding annual pension payments, highlighting the financial risk stemming from the district's elevated pension liabilities and statutory requirements that require the district to fully fund its employer contributions. The A1 rating on the GOLT Notes is notched once off the district's issuer rating and reflects the inherently weaker security, which does not benefit from a dedicated property tax levy.
• Oak Lawn, IL: Moody's downgraded this village to A2 from A1. The A2 rating reflects financial risk stemming from the village's elevated unfunded pension liabilities and statutory requirements that require the village to increase its contributions to two single-employer defined benefit pension plans to levels substantially above those of recent years. The village's operating reserves are narrow, but have improved recently; however, reserves have grown partly because the village has not made adequate pension contributions.
• Lemont Fire Protection District, IL: Moody's downgraded this fire protection district to A1 from Aa3. The A1 rating reflects the district's location near Chicago (Baa1 negative); recent, substantial tax base declines; ample operating reserve levels relative to budget; limited revenue raising ability; modest direct debt burden; and history of underfunding pensions relative to the plans' actuarially-determined annual required contributions (ARC).
• King's Daughters' Medical Center, KY: Moody's downgraded this medical center to A3 from A2. The downgrade is attributable to KDMC's greater than expected and higher operating losses in the fourth quarter of FY 2013, a sizable operating loss and negative operating cash flow in the first half of FY 2014 and expected year-end operating losses, volume and market share losses, and a significant decline in liquidity by fiscal year-end due to a large $40.9 million Department of Justice settlement.
• Rochester Community School District, MI: Moody's downgraded this school district to Aa3 from Aa2. The Aa3 primarily reflects the district's narrow reserve position, limited budgetary flexibility and long term operating risk posed by exposure to an underfunded cost-sharing retirement plan. Also incorporated into the Aa3 rating are the district's large tax base, positive enrollment trend, strong socioeconomic characteristics and low debt burden.
• Ohio Water Development Authority: Moody's downgraded to A1 from Aa3 the long-term rating and affirmed the VMIG 1 short-term rating assigned to the State of Ohio Multi-Modal Interchangeable Rate Water Development Revenue Refunding Bonds, Series 2001 (TimkenSteel Project) (the Bonds) in conjunction with the amendment of the existing letter of credit supporting the Bonds provided by The Northern Trust Company (the Bank) and the remarketing of the Bonds.
• Henry Ford Health System, MI: Moody's downgraded this health system to A3 from A2. The rating downgrade to A3 from A2 is attributable to a marked downturn in operating performance in FY 2013 with continued operating losses in the first quarter of FY 2014 due largely to the system-wide implementation of the Epic electronic medical record (EMR) system.
• City of Beaumont Waterworks and Sewer System, TX: Moody's downgraded this waterworks and sewer system to A1 from Aa3. The rating downgrade to A1 reflects the system's diminishing unrestricted reserve levels in recent years, which are inconsistent with the Aa3 rating category. The A1 rating also incorporates the system's sizable and stable service area that includes the City of Beaumontand industrial customers outside the city, adequate legal provisions, and adequate debt service coverage levels. The rating also incorporates an elevated debt burden and a history of regular rate increases.
• Winthrop-University Hospital Association, NY: Moody's downgraded this association to Baa2 from Baa1. The rating downgrade to Baa2 reflects Winthrop University Hospital Association's weaker financial performance and low cash flow generation in FY 2013, in conjunction with the organization's proposed additional debt of $60 million to fund various strategic capital projects.
• Hampton County School District No. 2, SC: Moody's downgraded this school district to Ba3 from A3. The downgrade of the district's underlying rating to Ba3 reflects the district's deficit fund balance and liquidity position, attributable to several consecutive years of operational imbalance and failure to enact timely expenditure cuts to offset declining revenues.
• Lakeview Public School District, MI: Moody's downgraded this school district to A2 from Aa3. The A2 primarily reflects the district's narrow reserve position following consecutive years of operational imbalance, limited budgetary flexibility, and elevated debt burden. Also incorporated into the A2 rating are the district's modestly-sized tax base that has experienced rapid depreciation, positive enrollment trend, average socioeconomic profile and long term operating risk posed by exposure to an underfunded cost-sharing retirement plan.