Wall St futures tumble after Fitch downgrades top-tier US rating
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[August 02, 2023] By
Johann M Cherian and Bansari Mayur Kamdar
(Reuters) - Wall Street futures tumbled on Wednesday after rating agency
Fitch's move to downgrade the U.S. government's credit rating hit
appetite for risky assets around the world.
Fitch downgraded the United States to AA+ from AAA, citing fiscal
deterioration over the next three years as well as a growing general
government debt burden, making it the second major rating agency after
Standard & Poor's move in 2011 to strip the country of its triple-A
rating.
The yield on U.S. 10-year Treasury notes slipped to 4.02%. Safe havens
gold and the Japanese yen rose, while the dollar index edged higher.
"Though the U.S. now holds two AA+ ratings, we think the latest
downgrade does not reflect any new fiscal information and should only
have a limited market impact," Mark Haefele, chief investment officer at
UBS Global Wealth Management, said in a note.
At 06:55 a.m. ET, Dow e-minis were down 104 points, or 0.29%, S&P 500
e-minis were down 24 points, or 0.52%, and Nasdaq 100 e-minis were down
132.25 points, or 0.84%.
Megacap stocks including Tesla, Nvidia, Meta Platforms and Microsoft
fell between 0.8% and 2.5% in premarket trading.
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Beating the trend, Advanced Micro Devices rose 1.6% after forecasting an
upbeat finish to the year and on plans to launch AI chips that could
compete with market leader Nvidia.
U.S. second-quarter earnings are now expected to fall 5.9% from a year
earlier, as per Refinitiv data, compared with a 7.9% decline estimated a
week earlier.
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Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., July 20, 2023.
REUTERS/Brendan McDermid/File Photo
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The benchmark S&P 500 and tech-heavy Nasdaq took a breather in the
previous session as investors entered a seasonally slow August. The
blue-chip loaded Dow ended higher, underpinned by gains in
Caterpillar after the global economic bellwether posted upbeat
quarterly profits.
Among other early movers, Starbucks eased 1.9% after the world's
largest coffeehouse chain missed market expectations for quarterly
comparable sales.
CVS Health Corp gained 1.4% on beating Wall Street estimates for
quarterly profit, boosted by strength in its pharmacy benefit
management unit and lower-than-expected medical costs in its health
insurance business.
DuPont de Nemours added 0.3% on beating estimates for second-quarter
profit, benefiting from strong demand for materials used in
aerospace, automotive and healthcare industries.
Wells Fargo said it expects to pay as much as $1.8 billion to help
replenish a government deposit insurance fund that was drained of
$16 billion this year after three banks collapsed, sending its
shares 1% lower.
Investors also await the ADP National Employment report for July
that could offer more clues on the domestic labor market, ahead of
much awaited non-farm payrolls data due on Friday.
(Reporting by Johann M Cherian and Bansari Mayur Kamdar in Bengaluru;
Editing by Saumyadeb Chakrabarty)
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