Fitch Ratings rattles markets by putting U.S. on "rating watch negative"

10/15/2013 6:32 pm EST


Jim Jubak

Founder and Editor,

Fitch Ratings broke ranks with Moody’s Investors Service and Standard & Poor’s today after the close of the New York markets to put the United States long-term foreign and local currency issuer default rating at Rating Watch Negative. Earlier in October Moody’s had said that the current debt ceiling crisis was less serious than the 2011 battle and that U.S. creditworthiness was not at risk. On September 30 Standard & Poor’s said that the debt ceiling battle was unlikely to change the company’s AA+ rating on U.S. debt. (Both Moody’s and Fitch have continued to rate U.S. government debt at AAA.)

U.S. stock markets finished the day on a negative note with the Dow Jones Industrials down 0.87% and the Standard & Poor’s 500 off 0.71%. Three-fourths of all stocks traded on the New York Stock Exchange were down for the day. Selling accelerated in the afternoon after Senator Richard Durbin, the second ranking Democrat in the Senate said Senate negotiations had been suspended while the body waited to see what plan the House of Representatives might come up with. (At the moment it looks like the House will vote on a plan put forward by Republican House leadership tonight. Democratic leaders are urging Democrats in the House to vote No. It’s not clear if the bill will win enough Republican votes to pass.)

After the Fitch Ratings call, the futures market continued to move lower with S&P 500 futures down 10.7 points and the Dow Jones Industrial Average futures off 122 points.

Reaction from the Tokyo market when it opens will be a key indicator of exactly how seriously financial markets take the Fitch Ratings news and the political moves in Washington today. That reaction is complicated by Typhoon Wipha, projected to become Tokyo’s biggest storm in 10 years and forecast to reach the city today before heading northeast toward the site of the damaged Fukushima nuclear plant. The Tokyo Stock Exchange is, as of now, scheduled to operate as normal.
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