We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Wall Street ended sharply lower on Wednesday following an unexpected credit rating downgrade for the United States. The 10-year treasury yield touched a nine-month high. All three major indexes ended firmly in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1% or 348.16 points to close at 35,282.52. Twenty-two components of the 30-stock index ended in negative territory, while eight ended in positive.
The S&P 500 dropped 1.4%, or 63.34 points, to close at 4,513.39. Eight out of the 11 broad sectors of the benchmark index ended in negative territory. The Technology Select Sector SPDR (XLK), the Communication Services Select Sector SPDR (XLC) and the Consumer Discretionary Select Sector SPDR (XLY) receded 2.5%, 1.9% and 1.8%, respectively, while the Consumer Staples Select Sector SPDR (XLP) added 0.4%.
The tech-heavy Nasdaq declined 310.47 points, or 2.2%, to finish at 13,973.45.
The fear-gauge CBOE Volatility Index (VIX) was up 15.5% at 16.09. A total of 11.9 billion shares were traded on Wednesday, higher than the last 20-session average of 10.8 billion. The S&P 500 recorded 12 new 52-week highs and five new lows, while the Nasdaq Composite posted 49 new highs and 111 new lows.
Fitch Cuts U.S. Credit Rating From AAA to AA+
On Tuesday evening, Fitch ratings downgraded the U.S. sovereign credit grade by one level from AAA to AA+, citing "ballooning fiscal deficits and erosion of governance," leading to repeated debt limit emergencies over the past two decades as the reason. Fitch became the second major agency in the last 12 years to have cut the country's rating, taking a leaf out of the Standard & Poor's book. S&P had stripped the country of its AAA grade back in 2011.
The news weighed down on Wall Street, as all the major indexes took a hit. Nasdaq recorded its worst day since February of this year. Global stock markets got impacted too, with Europe and Asia bearing the brunt. However, the general feeling is that the United States is not going into debt-default mode, even as its rating takes a hit. AA+ is a fairly strong rating. Investors are apprehensive, but they are not in panic mode.
10-Year Treasury Yield Touches 9-Month High
U.S. 10-year treasury yields were last up 2.4 bps at 4.074% from Tuesday's levels. At one point during the session, the benchmark yield touched 4.122%, its highest since last November.
The rise in yields is being interpreted as a direct fallout of Fitch downgrading the U.S. government's credit rating overnight and strong private employment data, which was released on the day that might turn the Fed hawkish again on monetary policy.
Usually, when long-term treasury yields rise and an economic slowdown is projected for the near future, mega-cap growth stocks bear the brunt as their current valuation seems over-estimated with respect to their prospects. Investors abandon these speculative stocks and rush to the safety of the bond market. Technology and Consumer Discretionaries thus became two of the biggest losing sectors of the day.
Per a government report, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) for the week ending Jul 28, 2023, decreased by 17 million barrels from the previous week. In the prior week, inventory had gone down by 0.6 million barrels.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Stock Market News for Aug 3, 2023
Wall Street ended sharply lower on Wednesday following an unexpected credit rating downgrade for the United States. The 10-year treasury yield touched a nine-month high. All three major indexes ended firmly in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1% or 348.16 points to close at 35,282.52. Twenty-two components of the 30-stock index ended in negative territory, while eight ended in positive.
The S&P 500 dropped 1.4%, or 63.34 points, to close at 4,513.39. Eight out of the 11 broad sectors of the benchmark index ended in negative territory. The Technology Select Sector SPDR (XLK), the Communication Services Select Sector SPDR (XLC) and the Consumer Discretionary Select Sector SPDR (XLY) receded 2.5%, 1.9% and 1.8%, respectively, while the Consumer Staples Select Sector SPDR (XLP) added 0.4%.
The tech-heavy Nasdaq declined 310.47 points, or 2.2%, to finish at 13,973.45.
The fear-gauge CBOE Volatility Index (VIX) was up 15.5% at 16.09. A total of 11.9 billion shares were traded on Wednesday, higher than the last 20-session average of 10.8 billion. The S&P 500 recorded 12 new 52-week highs and five new lows, while the Nasdaq Composite posted 49 new highs and 111 new lows.
Fitch Cuts U.S. Credit Rating From AAA to AA+
On Tuesday evening, Fitch ratings downgraded the U.S. sovereign credit grade by one level from AAA to AA+, citing "ballooning fiscal deficits and erosion of governance," leading to repeated debt limit emergencies over the past two decades as the reason. Fitch became the second major agency in the last 12 years to have cut the country's rating, taking a leaf out of the Standard & Poor's book. S&P had stripped the country of its AAA grade back in 2011.
The news weighed down on Wall Street, as all the major indexes took a hit. Nasdaq recorded its worst day since February of this year. Global stock markets got impacted too, with Europe and Asia bearing the brunt. However, the general feeling is that the United States is not going into debt-default mode, even as its rating takes a hit. AA+ is a fairly strong rating. Investors are apprehensive, but they are not in panic mode.
10-Year Treasury Yield Touches 9-Month High
U.S. 10-year treasury yields were last up 2.4 bps at 4.074% from Tuesday's levels. At one point during the session, the benchmark yield touched 4.122%, its highest since last November.
The rise in yields is being interpreted as a direct fallout of Fitch downgrading the U.S. government's credit rating overnight and strong private employment data, which was released on the day that might turn the Fed hawkish again on monetary policy.
Usually, when long-term treasury yields rise and an economic slowdown is projected for the near future, mega-cap growth stocks bear the brunt as their current valuation seems over-estimated with respect to their prospects. Investors abandon these speculative stocks and rush to the safety of the bond market. Technology and Consumer Discretionaries thus became two of the biggest losing sectors of the day.
Consequently, shares of NVIDIA Corporation (NVDA - Free Report) and Tesla, Inc. (TSLA - Free Report) fell 4.8% and 2.7%, respectively. NVIDIA carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Economic Data
Per a government report, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) for the week ending Jul 28, 2023, decreased by 17 million barrels from the previous week. In the prior week, inventory had gone down by 0.6 million barrels.