In a night of volatility on Wall Street, U.S. stock futures took a hit as Fitch Ratings downgraded the nation’s long-term rating from AAA to AA+. Traders were left grappling with the implications of this move and closely analyzing the latest second-quarter earnings results.
The Dow Jones Industrial Average futures were down by 103 points, representing a decline of 0.29%. Likewise, the S&P 500 and Nasdaq-100 futures also experienced dips of 0.44% and 0.63%, respectively.
Fitch Ratings justified the downgrade, citing concerns about the “expected fiscal deterioration over the next three years.” The news cast a shadow over the market, with investors warily observing its impact on the already cautious atmosphere in August.
Amidst the mixed performance, Advanced Micro Devices shone, reporting better-than-expected quarterly results, leading to a 2% rise in extended trading. Conversely, SolarEdge Technologies suffered a 12% drop after failing to meet second-quarter revenue expectations.
These developments followed a somewhat lackluster start to August’s trading in the S&P 500, which fell by 0.27%, and the Nasdaq Composite, which declined by 0.43%. However, the Dow Jones Industrial Average bucked the trend, gaining 71.15 points, equivalent to 0.2%, and even reaching its highest level since February 2022 during the session.
Current Earning Season
The current earnings season has proved to be more favorable than anticipated. According to FactSet data, around 82% of S&P 500 companies that have reported their results delivered positive surprises. This influx of earnings beats has fueled bullish investor sentiment and supported the ongoing market recovery, a trend that began in the third quarter of the year.
Some analysts are increasingly optimistic about the long-term prospects of the market. Adam Parker, from Trivariate Research, pointed out that the lack of a bear case for 2023 may not be the sole reason for the current market conditions. He believes that a more plausible bull case for 2024 and 2025 is gaining traction among investors.
As the market awaits further earnings reports, CVS Health, Yum! Brands, and Humana are scheduled to disclose their earnings before the opening bell on Wednesday, potentially providing further insight into the economy’s health.
Traders are also keeping a close eye on the July ADP jobs report, which is set to be released on Wednesday morning. Economists polled by Dow Jones expect the report to show an increase of 175,000 jobs, which would be a decline from the previous month’s rise of 497,000 jobs.