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
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
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.
-
How to Help Your Kids Without Ruining Your Retirement
Here are some general considerations to ensure the gift of assets to your kids will not negatively affect your financial future.
By Mario Hernandez Published
-
AI to Power the Next Generation of Robots
The Kiplinger Letter There's increasing buzz that the tech behind ChatGPT will make future industrial and humanoid robots far more capable.
By John Miley Published
-
Stock Market Today: Markets Tumble Amid Slower Economic Growth and Rising Prices
Disappointing readings on GDP and inflation helped tank equities.
By Dan Burrows Published
-
Stock Market Today: Stocks Run Out of Steam Ahead of Meta Earnings
The Dow Jones Industrial Average snapped a four-day winning streak after Boeing's first-quarter results.
By Karee Venema Published
-
Stock Market Today: Nasdaq Soars Ahead of Tesla Earnings
The EV stock rose nearly 2% ahead of its highly anticipated Q1 earnings report, due after tonight's close.
By Karee Venema Published
-
Stock Market Today: Markets Rebound Ahead of Big Week for Earnings
Equities rallied on easing geopolitical tensions, upcoming quarterly results.
By Dan Burrows Published
-
Stock Market Today: Nasdaq Spirals as Netflix Nosedives
A big earnings boom for credit card giant American Express helped the Dow notch another win.
By Karee Venema Published
-
Stock Market Today: S&P 500, Nasdaq Extend Losing Streaks
The two indexes have closed lower for five straight sessions.
By Karee Venema Published
-
Stock Market Today: Dow Slips After Travelers' Earnings Miss
The property and casualty insurer posted a bottom-line miss as catastrophe losses spiked.
By Karee Venema Published
-
Stock Market Today: Stocks Stabilize After Powell's Rate-Cut Warning
The main indexes temporarily tumbled after Fed Chair Powell said interest rates could stay higher for longer.
By Karee Venema Published