Market Meltdown: US Downgrade Sparks Sell-Off as Tech Stocks Tumble – Latest Earnings in Focus
Stock futures are experiencing a Market Meltdown. There is a decline following the recent downgrade of the United States’ long-term rating by Fitch.
This is leading to a sell-off as traders closely analyze the latest earnings reports. On Wednesday, futures linked to the S&P 500 dropped by 0.3%.
Nasdaq 100 futures slipped 0.4%, and Dow Jones Industrial Average futures decreased by 0.2%, representing a dip of 61 points.
Notably, chipmaker Qualcomm’s shares declined by 8% due to the company missing analysts’ expectations on fiscal third-quarter revenue and guidance for the current period.
Conversely, DoorDash saw a rise of 3.6% after surpassing revenue expectations.
Investors are awaiting the earnings reports of tech giants Apple and Amazon, scheduled to be released after the market close.
Currently, approximately 67% of the S&P 500 constituents have disclosed their latest quarterly reports, with around 81% of those companies beating expectations, according to FactSet.
The sell-off on Wednesday mainly affected the tech-heavy Nasdaq Composite. It experienced a drop of more than 2%, marking the worst day for the index since February.
This was due to tech stocks being affected by increasing bond yields. Both the S&P 500 and Dow Jones Industrial Average also closed lower.
Fitch Ratings‘ decision to lower the United States’ long-term foreign-currency issuer default rating from AAA to AA+ on Tuesday played a significant role in this market reaction.
Fitch cited “expected fiscal deterioration” over the next three years and weakening governance for the downgrade.
Prior to this, the market had been experiencing a period of strong gains, particularly in growth-oriented stocks.
Quincy Krosby, the chief global strategist for LPL Financial, noted that markets sometimes require time to digest substantial gains.
This may occur especially when combined with a volatile seasonal backdrop. Fitch’s rationale for the downgrade further contributed to the market pullback.
In other news, the Bank of England raised interest rates by 25 basis points on Thursday, joining other global central banks’ efforts to control inflation.
Traders are now preparing for the release of more economic data, including weekly initial jobless claims and durable goods orders, ahead of Friday’s July payrolls report.
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