Fitch downgrade sends Dow falling more than 100 points after credit agency nixed US

Wall Street opened lower on Wednesday after rating agency Fitch rattled investors with an unexpected downgrade of the US government’s credit rating. 

Shortly after the opening bell, the Dow Jones Industrial Average slid 146 points, or 0.4 percent. The benchmark S&P 500 dropped 0.8 percent, and the Nasdaq Composite retreated 1.1 percent.

On Tuesday, Fitch downgraded the United States to AA+ from AAA, citing expected ‘fiscal deterioration’ over the next three years as well as a high and growing general government debt burden. 

It follows the bitter Congressional showdown over the debt ceiling this spring, and marked the second downgrade from a major rating agency, after Standard & Poor’s move in 2011 to strip the country of its triple-A rating. 

Fitch’s move dented appetite for risky assets around the world, and tech megacap stocks led the selloff, with Tesla, Nvidia, Meta and Microsoft falling between 0.75 percent and 2.75 percent in early trading. 

Wall Street opened lower on Wednesday after rating agency Fitch rattled investors with an unexpected downgrade of the US government’s credit rating

‘We’re headed for a lower opening because the Fitch downgrade is causing a bit of a selloff,’ said Peter Cardillo, chief market economist at Spartan Capital Securities.

‘All that is important is that it’s a wake up call for the politicians because of prolonged agreements and fiscal irresponsibility.’

Also weighing on investor sentiment, ADP’s private payrolls report came in hotter than expected on Wednesday morning, showing a gain of 324,000 jobs in July versus the 175,000 economists had expected.

Continuing tightness in the labor market is raising fears that the Federal Reserve could keep interest rates higher for longer, weighing on growth.

On the other hand, corporate earnings have exceeded expectations this year, suggesting an expected slowdown is better than feared. 

US second-quarter earnings are now expected to fall 5.9 percent from a year earlier, as per Refinitiv data, compared with a 7.9 percent decline estimated a week earlier.

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.

Fitch’s move dented appetite for risky assets around the world, and tech megacap stocks led the selloff. Pictured: Traders work on the floor of the New York Stock Exchange last week

The international ratings agency, which has offices in London, pictured here, and in New York City made the move to downgrade the U.S. credit rating

Among other early movers, Starbucks eased 1.1 percent after the world’s largest coffeehouse chain missed market expectations for quarterly comparable sales.

CVS Health Corp shed 0.9 percent even as it reported upbeat second-quarter earnings, and said it had begun implementing a restructuring program to cut costs after a recent spree of acquisitions.

DuPont de Nemours fell 1.4 percent on reporting a 7 percent fall in quarterly revenue due to weakness in the electronics and industrial unit.

Emerson climbed 4.8 percent after the industrial software firm raised its annual profit outlook as companies increase spending on automation in response to a tight labor market.

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 0.9 percent lower.