Linea Mercati Interview 8/1/23
August 2, 2023Linea Mercati Interview 8/2/23
August 3, 2023By Johann M Cherian and Bansari Mayur Kamdar
August 2, 20238:45 AM EDTUpdated 4 min ago
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
- Summary
- Companies
- Fitch cuts US credit rating to AA+
- Starbucks falls on Q3 revenue miss
- Wells Fargo slides on plan to help refill FDIC coffers
- U.S. private payrolls beat expectations in July, ADP says
- Futures down: Dow 0.41%, S&P 0.60%, Nasdaq 0.84%
Aug 2 (Reuters) – Wall Street was set to open lower 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.
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The yield on U.S. 10-year Treasury notes slipped to 4.04%. Safe havens gold and the Japanese yen rose, while the dollar index edged higher.
“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.”
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Chart shows that the U.S.’s long-term foreign currency rating was downgraded by Fitch to AA+ in 2023, following a similar move from S&P in 2011.
At 08:33 a.m. ET, Dow e-minis were down 148 points, or 0.41%, S&P 500 e-minis were down 27.75 points, or 0.6%, and Nasdaq 100 e-minis were down 133.5 points, or 0.84%.
Megacap stocks including Tesla (TSLA.O), Nvidia (NVDA.O), Meta Platforms (META.O) and Microsoft (MSFT.O) fell between 0.9% and 2.0% in premarket trading.
Meanwhile, the ADP National Employment report showed private payrolls increased more than expected in July, pointing to continued labor market resilience that could shield the economy from a recession.
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Beating the trend, Advanced Micro Devices (AMD.O) rose 2.2% after forecasting an upbeat finish to the year and on plans to launch AI chips that could compete with market leader Nvidia (NVDA.O).
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.
The benchmark S&P 500 (.SPX) and tech-heavy Nasdaq (.IXIC) took a breather in the previous session as investors entered a seasonally slow August. The blue-chip loaded Dow (.DJI) ended higher, underpinned by gains in Caterpillar (CAT.N) after the global economic bellwether posted upbeat quarterly profits.
Among other early movers, Starbucks (SBUX.O) eased 1.1% after the world’s largest coffeehouse chain missed market expectations for quarterly comparable sales.
CVS Health Corp (CVS.N) shed 0.9% 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 (DD.N) fell 1.4% on reporting a 7% fall in quarterly revenue due to weakness in the electronics and industrial unit.
Emerson (EMR.N) climbed 4.8% 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 (WFC.N) 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% lower.
Reporting by Johann M Cherian and Bansari Mayur Kamdar in Bengaluru; Editing by Saumyadeb Chakrabarty and Vinay Dwivedi
Our Standards: The Thomson Reuters Trust Principles.
