What’s driving markets
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- Perhaps most curious was chipmaker Advanced Micro Devices AMD,
-7.02% , as its stock ended sharply lower despite an initially positive reaction to its earnings. Tech companies this reporting season have struggled to see positive share-price reaction to their results, which raises the bar for Apple AAPL,-1.55% and Amazon.com AMZN,-2.64% , which each report results after the close.
“Although the slide is far from suggesting a major trend reversal, if incoming U.S. data, and especially the U.S. jobs report on Friday, forces market participants to raise their implied Fed rate path, the correction may continue for a while longer,” said Charalampos Pissouros, senior investment analyst at XM.
“That said, apart from changes in the macroeconomic and monetary policy outlooks, equity traders will probably pay special attention to earnings results by Amazon and Apple, which are scheduled to be released after the closing bell today.”
Thursday will see data on jobless claims, second-quarter productivity and the Institute for Supply Management services index.
Fitch downgrade a 'somewhat minor' thing, and the dollar won't be overthrown: Intel CEO
- At least that's the vibe from Intel's (INTC) chief at the C-suite leadership table.
"So at one level, I just sort of say, OK, it's a downgrade," added the globe-trotting Gelsinger.
- "Hey, there may be some implications for costs of debt. But I really see that as somewhat minor. I view it more as a statement to, hey, get our debt situation under control in the US."
Late Tuesday, the entity slashed its rating on US debt to AA+ from AAA.
- Fitch said it "expected fiscal deterioration over the next three years," as one reason for its downgrade.
- The other factors included a "growing debt burden" and the "erosion of governance."
Interestingly, and to Gelsinger's point, the US dollar has gained strength in the wake of Fitch's move, now hovering around a four-week high.
Other top executives Yahoo Finance have talked to are using the downgrade moment to play up their financial strength to investors.
"It's incredibly important," Starbucks (SBUX) CFO Rachel Ruggeri told Yahoo Finance about the downgrade. "That's why we've been focused on continuing to operate within a three times leverage ratio. So that's the guide that we keep so that we can maintain our BBB+ rating. But also, it allows us to be able to support, I'd say, a more conservative stance in terms of our overall financial health."
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Market Snapshot
U.S. stock futures point to third straight drop on Wall Street
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Stock Market Today: Futures Fall; Treasury Yields rise
Apple and Amazon will post earnings after markets shut
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Aug. 3, 2023 at 6:39 AM EDT
- Rising bond yields, spurred in part by America’s credit downgrade, have weighed on stocks, adding to pressure from the decline in corporate profits.
- The selling has spread overseas, contributing to losses for stocks in Europe and Asia on Thursday.
IN RECENT TRADING
Futures for the S&P 500 slipped, a day after the benchmark index posted its biggest loss since April. Contracts for the Nasdaq-100 and the Dow industrials also traded lower.
Government-bond prices fell. The yield on 10-year Treasury notes rose above 4.1%, after settling Wednesday at 4.077%, their highest end-of-day level since November.
Overseas stocks retreated. The Stoxx Europe 600 dropped, as stocks including semiconductor-maker Infineon Technologies, airline Deutsche Lufthansa and London Stock Exchange Group dropped on quarterly results.
Asian markets were broadly lower, but mainland Chinese stocks rose after survey data showed a pickup in services activity.
Oil prices slipped. Brent-crude futures, the benchmark, edged lower.
—By Joe Wallace
- The U.S. is downgraded. How much does it matter to markets? And the surprise asset that may benefit.
Steven Goldstein is based in London and responsible for MarketWatch's coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch's economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.
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Published as of: August 2, 2023, 4:40 p.m. ET
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(Wednesday market close) Fitch Ratings' unexpected downgrade of the United States' credit rating upstaged the busiest week of quarterly earnings season so far, sending investors fleeing from riskier assets Wednesday. The S&P 500® Index (SPX) and tech-focused Nasdaq Composite (COMP) were both at three-week lows.
Fitch Ratings said late Tuesday it had lowered its rating for Treasuries to AA+ from AAA, citing an "expected fiscal deterioration over the next three years, a high and growing general government debt burden . . . (and) repeated debt limit standoffs and last-minute resolutions," according to a statement. Read our full take on the downgrade here.
Fitch's downgrade prompted a retreat from higher-risk assets like equities and possibly offered an opportunity to take profits in what's still a bull market for U.S. stocks, says Kevin Gordon, senior investment strategist at the Schwab Center for Financial Research.
"As the day progressed, the equity selloff turned more into a pure 'risk-off' trade that weighed on the tech sector in particular," Kevin says, noting that market sectors considered to be lower-risk, such as consumer staples, held up better.
A larger-than-expected quarterly Treasury auction announced Wednesday added to the pressure on stocks, he adds, noting that the benchmark 10-year note yield is now at its highest level since November.
Here is where the major benchmarks ended:
- The S&P 500 Index was down 63.34 points (1.4%) at 4,513.39; the Dow Jones Industrial Average (DJIA) fell 348.16 points (1.0%) to 35,282.52; the Nasdaq Composite dropped 310.47 points (2.2%) at 13,973.45.
- The 10-year Treasury note yield (TNX) rose about 3 basis points to 4.073%.
- Cboe's Volatility Index (VIX) was up 2.2 at 16.13.
Consumer discretionary and energy shares were also weaker, with the latter pressured by a more-than 2% drop in crude oil futures. The U.S. dollar index (DXY) strengthened for a fifth straight day and touched a four-week high, as investors shed riskier assets in favor of what are considered safe havens. Volatility based on the VIX hit its highest level since late May.
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