Stock Market Today: Stocks Slide on Rare U.S. Credit Rating Downgrade
The main benchmarks all closed in the red after the U.S. saw its credit rating downgraded for the first time since 2011.
Stocks opened lower Wednesday and continued declining as the session wore on as a rare downgrade to the U.S. credit rating spooked investors.
Also on Wall Street's radar today was a much higher-than-expected reading on private payrolls, though this did little to change expectations about what the Federal Reserve will do with interest rates at its September meeting.
Late Tuesday, Fitch Ratings downgraded the long-term credit rating for the U.S. to AA+ from AAA. "The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management," the ratings agency said in a statement. This is just the second time in history that the U.S. has seen its credit rating downgraded. In August 2011, Standard & Poor's lowered the country's long-term credit rating amid another fight over lifting the debt ceiling.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"While not necessarily wrong in its assessment, the rating downgrade will likely not have an impact on U.S. government debt or markets broadly," says Lawrence Gillum, chief fixed income strategist for LPL Financial. "The U.S. remains the safe haven during times of market stress and the downgrade will likely not change that."
Part of investors' anxiety related to the credit rating may have to do with what stocks did back in 2011, with the S&P 500 shedding about 8% over the next two months. But ultimately, the market stabilized and resumed its longer-term uptrend.
Private payrolls come in hot
Meanwhile, ADP this morning said the U.S. added 324,000 private jobs in June, blowing past economists' estimates for a gain of 175,000. "Wall Street typically shrugs off the ADP report, especially considering we have only seen a year of its reporting with their new methodology," says Edward Moya, senior market strategist at currency data provider OANDA. "This is still an impressive print and should support the Fed hawks argument that the labor market is still tight and that they might not yet be done with raising rates."
However, futures traders are currently pricing in an 82.5% chance of a pause at the next Fed meeting in September, according to CME Group.
AMD stock sinks after earnings
On the earnings front, semiconductor stock Advanced Micro Devices (AMD) tumbled 7.0% as the company's second-quarter data center revenue came in below estimates. Still, AMD's earnings and total revenue beat expectations.
CVS Health (CVS) was another post-earnings mover, with shares climbing 3.3%. The drugstore chain and healthcare services company reported higher-than-expected second-quarter earnings and revenue due in part to surging sales in its healthcare benefits segment.
At the close, the Nasdaq Composite was down 2.2% at 13,973, the S&P 500 was off 1.4% at 4,513, and the Dow Jones Industrial Average was 1.0% lower at 35,282. However, the major indexes remain comfortably higher on the year, with the Nasdaq up 33.5%, the S&P 500 boasting a 17.6% return and the Dow sitting on a 6.4% advance.
"In the big picture, some kind of a pullback was overdue, after the sizzling run we've had, " says Louis Navellier, chairman and founder of Navellier & Associates. "At least we can identify the reason today."
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.
-
Broadcom Stock Is the Best S&P 500 Stock After Earnings
Broadcom stock is soaring Friday after the chipmaker beat earnings expectations for its most recent quarter, fueled by AI demand. Here's what you need to know.
By Joey Solitro Published
-
How Lower Interest Rates Will Help the Housing Market
Lower interest rates will give the industry life again as they will likely create more demand and more incentives for developers and thaw a static market.
By Zain Jaffer Published
-
Why Is Warren Buffett Selling So Much Stock?
Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
By Dan Burrows Published
-
Fed Cuts Rates Again: What the Experts Are Saying
Federal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
By Dan Burrows Published
-
Stock Market Today: Stocks Struggle After Meta, Microsoft Earnings
All three major indexes closed lower on Thursday, making for a grim Halloween.
By David Dittman Published
-
Stock Market Today: Stocks Slide as Solid GDP and Softer Inflation Vex Rate Cut Bets
Encouraging economic news damped hopes for accelerated rate cuts.
By Dan Burrows Published
-
Advanced Micro Devices Stock Sinks as Q4 Guidance Disappoints. What to Know
Advanced Micro Devices is one of the worst S&P 500 stocks Wednesday after the chipmaker's Q4 outlook left Wall Street wanting more.
By Joey Solitro Published
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have Today
Google parent Alphabet has been a market-beating machine for ages.
By Dan Burrows Published
-
Stock Market Today: Stocks Rally on Strong Netflix Earnings
Mega-cap tech leads the charge as markets rise for a sixth straight week.
By Dan Burrows Published
-
CVS Stock Falls After Karen Lynch Ouster: What to Know
CVS stock is lower Friday after the embattled healthcare company said Karen Lynch is out as CEO, effective immediately
By Joey Solitro Published