Stock Futures Fall Following Downgrade by Fitch US: Analyst Predictions “Pretty Painful” August

Market Sentiment Sours on U.S. Rating Downgrade

Due to a downgrading of the U.S. sovereign rating, market mood further deteriorated on Wednesday, escalating worries about overbought market circumstances. 

Fiscal irresponsibility and problems with the country’s administration were the reasons for this downgrading, according to Fitch. 

In this setting, the market is taking in a steady stream of earnings reports. 

As the market begins, traders may also voice concerns about increasing bond rates and look forward to the results of a private payroll survey.

Cues From Tuesday’s Trading:

The main averages ended Tuesday with a mixed performance as traders analyzed data indicating that the manufacturing sector is still contracting, that hiring is slowing, and that there have been more earnings reports.

The Nasdaq Composite and S&P 500 Index opened down and remained stagnant for the duration of the day, giving the indices a mixed start. 

While the Dow Industrials began the day in the black, there was some turbulence after the release of the economic data. 

The 30-stock blue-chip average finished at an 18-month high after dipping in and out of the positive zone in the middle of the session.

Stocks in consumer goods and utilities took some of the biggest hits throughout the day.

US Index Performance On Tuesday

IndexPerformance (+/-)Value
Nasdaq Composite-0.43%14,283.91
S&P 500 Index-0.27%4,576.73
Dow Industrials+0.20%35,630.68
Russell 2,000-0.45%1,994.17

Analyst Color:

According to Tom Lee of Fundstrat, August might be challenging after a great July since many people are on vacation and the month is more susceptible to shocks.

Additionally, he foresaw a possible “pretty painful drawdown” in the first two weeks of the month.

He asserted, “I think we are in a period when we are nervous about good news,” speculating that they will reintroduce the September rise.

Futures Performance On Wednesday

FuturesPerformance (+/-)
Nasdaq 100-0.70%
S&P 500-0.45%

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY fell 0.43% to $454.50 and the Invesco QQQ ETF QQQ slumped 0.70% to $380.12

Upcoming Economic Data:

At 8:15 a.m. EDT, ADP is scheduled to issue its private non-farm payroll data for July. 

In comparison to the 497,000 jobs gained in June, economists anticipate a decrease in employment growth to 189,000 in July.

At 10:30 a.m. EDT, the Energy Information Administration will publish its weekly petroleum status report as usual.

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