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U.S. stocks are falling as debt rating cut sours the mood

AuthorLiz Moyer
Published 08/01/2023, 07:02 PM
Updated 08/02/2023, 11:25 AM
© Reuters.

Investing.com -- U.S. stocks were falling on Wednesday after the surprise downgrading of the country’s top-tier credit rating by Fitch, while the quarterly corporate earnings season continues.

At 11:22 ET (15:22 GMT), the Dow Jones Industrial Average was down 269 points or 0.7%, while the S&P 500 was down 1.3% and the NASDAQ Composite was down 2.1%.

Fitch downgrade hits sentiment

Risk sentiment took a hit after Fitch downgraded the U.S. government’s credit rating to AA+ from AAA late Tuesday, citing likely fiscal deterioration over the next three years and repeated fraught debt ceiling negotiations.

Fitch became the second major rating agency after Standard & Poor’s move to strip the United States of its triple-A rating in 2011, but this decision brought a sharp response from the U.S. government, with Treasury Secretary Janet Yellen calling it "arbitrary and based on outdated data."

After the initial losses, “markets will likely see it in a similar way (i.e. strictly tied to the debt ceiling standoff) especially in a week full of important data releases and with the next Federal Reserve rate hike hanging in the balance,” said analysts at ING, in a note.

Earnings season continues

Strong earnings have largely helped stocks this reporting season, with around 82% of the S&P 500 companies having reported posting positive surprises, according to FactSet data. 

Pharmacy chain and health provider CVS Health (NYSE:CVS) rose 3.1% after strong earnings and revenue for the second quarter. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) fell 2.7% after the cruise operator posted weaker-than-expected guidance for the third quarter. Shares of Advanced Micro Devices Inc (NASDAQ:AMD) also slipped 6.7% after the chipmaker posted better-than-expected results.

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Chipmaker Qualcomm (NASDAQ:QCOM) and website platform Shopify (NYSE:SHOP) are scheduled to report after the close.

Starbucks (NASDAQ:SBUX) stock rebounded 3% after its global comparable sales missed estimates, as demand for the Frappuccino maker's drinks and food showed signs of slowing in North America. 

More labor data due for release

Turning to economic data, the July ADP jobs report said private employers added a much stronger than expected 324,000 positions in July, while expectations were for the addition of 189,000 jobs. The government's broader report on July labor trends is due on Friday.

The Fed won't meet to decide on rates again until September, and Chair Jerome Powell pointed out last week the importance of upcoming data in helping the policymakers decide upon the future path of interest rates.

(Oliver Gray and Peter Nurse contributed to this article.)

 

Latest comments

If it was a credit score it would be about 625, or a C+
Big thanks to all you libs, the national debt is now $254,000 per taxpayer, nicely done, keep spending like there's no tomorrow, appreciate it
LOL. Always a concern of GOP when they are out of power, never addressed when the hold the reins
under trump, the federal debt held by the public went up 50%, from $14.4 trillion to $21.6 trillion! thanks gop, nicely done...big thanks to all you rightwing r(etards), keep spending like there's no tomorrow, appreciate it
It is oh so easy to make money in stocks. Valuation doesnt matter, ai is huge, the inverted yield curve is false worry, every dip is a bought, tecnical overbought signals are wrong, treasuries are boring. This is nothing more than another opportunity like the banking crisis for investors of today to again pile in.
Literally everything is red today: stocks, commodities, and some of the bonds. Hope the bears enjoy making people bleed. Karma looks out for the rest of us
Old Man Fitch needs to be pushed off a short pier while in his wheel chair. His logic is undermining the Status Quo. No logic whatsoever. Just ignore this crying baby and he will go away. Keep investing. Later, Rufus.
Fitch is an old company, not man.  Retrumplicans are obsessed w/ gender.
they're also obsessed with age, but only bidens, not their own leader, mc(freeze)connells of course...
MAGA crowd in the house creating more financial catastrophe.... electing MAGA Republicans=Trashing America Again
Fitch simply getting the jump on further coming downgrades as soon as the BRICS currency gets launched later in August. Going to destroy USA debt over time. Won't be long bcurrency. oil will only be traded in BRICS currency and soon all China trade.
India ain't hot on the idea of helping the CCP dominate.  The CCP would love to further increase the Kremlin 's dependence on it.
Outdated data??? The US will be $33+ TRILLION in debt by the end of this year versus $16 Trillion only 10 years ago. The US national debt has MORE THEN DOUBLED in 10 years. In that same time period US GDP has grown from $17 Trillion to $25 Trillion (a very respectable 50%). But, US Debt is growing more then twice as fast as the economy - plus growing by $1 Trillion+ a year with no end in sight and not a single politician trying to stop it. The USA is now one of the top 10 indebted countries in the world. US corp debt is now higher then any other time in history, Credit Card debt is over $1 Trillion - its a nation living and growing on debt!!
  In 2021, the Biden admin had to spent to deal w/ the pandemic like Trump did in 2020.  Unlike the Trump admin, the Russian all-out invasion in 2022 caused the Biden admin to spend more on interest payments and on aid to Ukraine.  The Biden admin hasn't had it easy like the Trump admin had it in 2017-2019, when the Federal budget deficit grew every year despite low interest rates, strong economy and less aggressive Russia.
 I am not a Trump fan. But end of the day both have been pretty woeful for US Debt. The US economy lives off debt and the fact the US Dollar is the global reserve currency. Should the US Dollar ever lose that placement / recession impact growth - the US could well enter a 20+ year stagflation period similar to Japan. US debt is now 122% of GDP in the top 10 in the world alongside Italy / Greece / Venezuela etc. But most of these countries are trying to reduce debt - the USA tries to borrow and grow its way out of debt and sooner or later the party will be over and the bar tab called in....
  I've no problem agreeing that "both have been pretty woeful for US Debt".  It's that retrumplicans have a nasty habit of blaming it all on the other side; whereas Dems aren't doing that.
Putin and China thank the Biden admin, "Russian economy grows 5.3% year on year in June"
I don't know why US citizens put up with the oldest president in the history of their country and HIS imaginary war. Don't they have young, patriotic politicians? Just retire the old man he is effing usa up.
questioning election results is not a crime. If it was every Democrat would be in prison
  Maryus was bemoaning the fact Biden won election over Trump, who went way beyond simply questioning election results to lying about & illegally manipulating them.
Conspiring to fraudulently submit fake electors is a crime. Do you ever stop for a moment to wonder why you are constantly in a position of defending despicable behavior?
Bejing Biden was rigged into office in order to strengthen the Eastern Block. The democrat party is the party of corruption and sending money overseas and laundering into the pockets of their globalist buddies. They do not care about the US or taxpayer, they just want to siphon out as much of their money out of their pockets while leaving taxpayer with the debt, Meanwhile, also in the headlines today as US debt rating cut "Double-digit growth in real wages, retail sales as Russia's unemployment hits record low"
China is struggling US is struggling Europe is Struggling the ONLY HEAVEN IS INDIAN MARKET
Sell in US invest in India
M is reviewing US credit rating and is likely to follow
maybe FED asked for this? clearly their rate hikes aren't convincing many to get out of the market....maybe this will?
If return on Treasury papers increase, we could see new regional bank bankruptcy... Scenario of Silicon Valley Bank could be massive
interesting, what to you think FED will do next
Or maybe the retrumplicans bribed Fitch to downgrade.  Retrumplicans have been trying to talk the US economy into a collapse since Joe's election victory to improve Trump's election prospect, but the US economy has remained strong.
Wasn't Fitch they guy in American Pie who banged Stifler's Mom?
lmao
National debt has reached about $254,000 per taxpayer. Nice job, libs. What's next for you guys, clubbing baby seals?
 The national debt when Trump took office was $19.9 trillion, it was $26.9 trillion when he left. That's $7 trillion. Get your facts straight.
  The Federal budget deficit grew in every year of Trump's term, and under Biden, shrank in 2021, 2022 and in H1 of 2023.
  Trump had to deal w/ the pandemic; Biden has been dealing with both the pandemic and Russian all-out invasion of Ukraine and retrumplican obstruction.
Bidenomics results in a lower credit rating.
it was based off of the 2018-2020 data. that's trump. not biden
and men can get pregnant
"repeated fraught debt ceiling negotiations" is a retrumplican thing.
I am not an economic genius and admit it.  But you don't have to be a genius in anything to know that if you keep spending more than you make your credit rating will go south.  If you ran your household the way the US government handles things, you'd be living under a bridge and picking through garbage cans while your kids would be taken away from you.
If we are like the gov't and can print our own money, we'd be spending more.
Hopfuly the US gets there medicine sooner then later
Doesn't matter,  that America always has massive debt and continue. Deteriorated. $32 trillion in debt
buy the dip boys. Nasdaq will soar tomorrow.
it has nothing to do with the government spending 1 trillion in five weeks and the destruction of the USD.
buying opp?
I wonder if the next 2 interest rate hikes will also sour the mood.
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