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. 

‘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.

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.

A top Republican who was once close to ex-president Donald Trump wants to defund the anti-fraud police that jailed mobster Al Capone and take away their firearms.

Senator Joni Ernst, who represents Iowa in the upper house of Congress, has introduced a draft law that aims to ‘disarm the IRS (Internal Revenue Service).’

‘The taxman is fully loaded at the expense of the taxpayer,’ Ernst claimed. ‘Any further weaponization of this federal agency against hardworking Americans and small businesses is a grave concern.’

Her claims have echoes of a Republican-backed yet oft-debunked conspiracy theory, which circulated online last year, that the Biden administration was about to arm as many as 87,000 IRS agents to raid the homes of ordinary Americans. 

Ukraine-bashing Congresswoman Marjorie Taylor Greene of Georgia repeated the bogus claim on social media last August.

Ernst, once floated as a possible Trump VP pick in 2016, wants to pass her ‘Why Does the IRS Have Guns Act’ that would strip the IRS of the right to buy, receive or store  guns and ammunition.

Her blueprint could dent her reputation for fiscal conservatism, however, as the plan would hobble the IRS’s ability to claw back lost revenues from tax-dodgers.

The ex-servicewoman also says that any existing firearms held by the IRS should be sold off to pay off the federal deficit that hit an eye-watering $1.4 trillion in 2022.

She cited findings by the watchdog group Open the Books, which showed the IRS spent $35.2 million on guns, ammunition, and military-style equipment since 2006. 

But her bizarre call may raise eyebrows in mainstream GOP circles where Republicans have traditionally backed law enforcement officers and value abiding by the law. 

As most U.S. lawmakers know, the IRS set up its criminal investigations unit over a century ago in 1919.

Its goal was to disrupt and dismantle major drug and money laundering organizations, and its officers helped convict mafia boss Al Capone back in 1931.

The name of the elite unit back then was simply the IRS Enforcement Branch. 

And in 2009, its agents helped to put disgraced financier Bernie Madoff behind bars for swindling investors and retirement funds out of billions of dollars. 

Today, there are just over 2,000 IRS special agents of its some 80,000 employees who carry firearms.

The unit is a federal law enforcement agency that probes potential white-collar crimes such as tax fraud and has sweeping powers to make arrests.

The right of those officers to have guns is set out under federal legislation known as the U.S. code. 

A mere 8.000 of its overall staff are actually involved in the auditing of tax returns filed by American firms and workers.

IRS Commissioner Dan Werfel told a Congressional hearing in April that claims of the entire tax agency’s workforce being given arms and the power of arrest were false. 

‘Our criminal investigation division is where we work to reduce and engage in tax fraud and acute areas of tax evasion where in order to enforce, we’re putting federal employees’ life in danger and therefore, there’s a need to arm,’ he said.

Ernst, 52, remains an influential figure on the right of the Republican party and she drew several GOP presidential candidates to her annual ‘Roast and Ride’ event in Iowa on June 3.

Her bill to defund the IRS criminal investigations unit stands little chance of becoming law because the Democrats currently control the Senate.