Market Snapshot: Stock futures fall after market mood soured by Fitch lowering U.S. credit rating

by | Aug 2, 2023 | Stock Market

U.S. stock index futures stumbled Wednesday after markets were rattled by a lowering of the U.S. government’s credit rating, though data from ADP showed that the U.S. labor market is still quite strong. How are stock-index futures trading
S&P 500 futures
dipped 25 points, or 0.6%, to 4,575

Dow Jones Industrial Average futures
fell 137 points, or 0.4%, to 35,621

Nasdaq 100 futures
lost 134 points, or 0.9%, to 15,685

On Tuesday, the Dow Jones Industrial Average
rose 71 points, or 0.2%, to 35631, the S&P 500
declined 12 points, or 0.27%, to 4577, and the Nasdaq Composite
dropped 62 points, or 0.43%, to 14284.

What’s driving markets Equity-index futures succumbed to a broad risk off tone across markets after rating agency Fitch lowered the U.S.’s credit rating from AAA to AA+, citing “expected fiscal deterioration” and an “erosion of governance”. Fitch’s move followed a similar move by S&P Global in 2011 after a previous fight in Congress over raising the debt ceiling. The U.S. Treasury market acts as a global benchmark upon which many financial products are based and so uncertainty about its stability can cause anxiety for investors. The news found a stock market arguably vulnerable to unwelcome surprises, with the S&P 500 index having already gained 19.2% this year and the tech-heavy Nasdaq Composite up 36.5%. The CBOE VIX Index, an option-based gauge of expected S&P 500 volatility, jumped 8% to 15.1. Traditional perceived havens saw demand, with gold
nudging up to $1,988 an ounce, and benchmark German government bond yields
moving lower. U.S. 10-year Treasury yields
dipped 1 basis point to 4.02%. However, most analysts did not see the lowering causing the stock market much long-term damage. “While debt downgrades seldom, if ever, have long legs, investors may pause and let the dust settle before re-entering risk markets. However, within this super market-friendly environment of stable growth and a Fed close to the end of its hiking cycle creating fertile ground for stock gains, it’s unlikely risk sentiment will wander too far off the soft landing path,” said Stephen Innes, managing partner of SPI Asset Management. Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said “the market remains sensitive as the final throes of earnings season rumble on, but 82% of S&P 500 companies that have reported results so far have surprised to the upside, offering a bit of a sentiment buffer.” In U.S. economic data, private-sector employment rose by 324,000 in July, payroll processor ADP sa …

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