Fitch cuts US credit rating to AA+

Wall Street closed mixed on the first trading day of August, as the latest slew of corporate results came in mixed.  The Dow Jones finished 0.2% higher, while the S&P 500 and the Nasdaq dipped by 0.3% and 0.4%, respectively.  Financials were among the weakest sectors yesterday, together with energy shares.  European shares were also lower on Tuesday, with the Euro Stoxx 50 Index retreating by 0.9% from Monday’s multi-year high.  The auto sector was among the worst performers after BMW said the supply chain was expected to be a headwind in the second half of the year. 

Summary for 02.08.2023 

• Asian equity markets fell on Wednesday, weighed down by weak global sentiment.  Investors also assessed a slew of economic reports in the region, headlined by data showing South Korea’s consumer inflation slowed to an over two-year low in July amid lower energy prices.  Shares in Australia, Japan, South Korea, Hong Kong, and mainland China all declined. 
• European and US shares are poised for declines after Fitch’s US downgrade damped investor sentiment. 
• Oil prices rose this morning, sticking to over three-month highs as industry data pointed to a substantially larger than expected drawdown in US inventories over the past week.   
• The US was stripped of its top-tier sovereign credit grade by Fitch Ratings, which criticized the country’s ballooning fiscal deficits and an “erosion of governance” that’s led to repeated debt limit clashes over the past two decades. The rating agency cut the US one level from AAA to AA+, echoing a move made more than a decade ago by S&P Global Ratings.  The decision drew criticism from leading economists.  
• The ISM Manufacturing PMI in the US edged higher to 46.4 in July from a nearly three-year low of 46 in June, but below market expectations of 46.8.  The reading pointed to a ninth straight month of contraction in factory activity, as demand remains weak, production slowed due to lack of work, and suppliers continue to have capacity. 
• JetBlue shares fell more than 8% yesterday after the company lowered its 2023 outlook and warned of a potential loss in the current quarter, citing challenges from a shift toward international travel and the end of its partnership with American Airlines in the Northeast.  Earnings and revenue for the second quarter were in line with analysts’ estimates. 
• Norwegian Cruise Line Holdings shares tumbled nearly 12.5% in Monday’ session after the company’s third-quarter guidance fell short of analyst estimates, overshadowing better than expected second quarter earnings and revenue. 
• Uber Technology fell nearly 6% yesterday after its revenue fell short of analysts’ expectations, despite reporting a surprise profit and offering an upbeat forecast for the current quarter.