Stocks were mixed yesterday, but they’re modestly weaker across the board today in the wake of the US’s sovereign debt downgrade. It’s worth noting that other markets aren’t doing much. Gold, silver, and crude oil are mixed, while Treasuries are modestly lower and the dollar is a bit higher.
On the news front...
The USA is no longer a “AAA” country...at least in the eyes of Fitch Ratings. The credit ratings agency lowered the US’s sovereign debt rating to “AA+” from “AAA” two months after putting its grade under review.
Fitch cited tax and spending initiatives that will drive the deficit higher, requiring more and more Treasury bond sales to plug the funding gap. The agency also cited an “erosion of governance” for the downgrade; in other words, blaming the repeated debt-ceiling squabbles and last-minute political malarkey associated with them.
Markets were...pretty muted in response. Volatility did rise. But this 15-minute chart showing the price of 10-year Treasury futures shows little impact from the move late on Aug. 1...or through this morning. If investors were truly worried, they’d sell bonds aggressively and yields – which move in the opposite direction of prices – would spike. We did see yields move a bit higher on economic data later in the morning, though.
Ahead of the release of official Labor Department figures on “Jobs Friday,” ADP said the US added 324,000 jobs in July. That easily topped the 189,000 forecast of economists, though it was down from 455,000 in June. A separate report yesterday showed job openings fell to 9.58 million in June, the lowest since April 2021. Layoffs also ticked lower though.
Finally, former President and current Republican candidate Donald Trump was indicated again in Federal District Court in Washington. This indictment from special counsel Jack Smith alleges three separate conspiracies related to the 2020 election. Trump will appear in court Thursday afternoon, though he already dismissed the indictment as “election interference” in a statement.
