2023-08-02 18:24:20
New York Rating agency Fitch’s downgrading of the United States’ credit rating has pushed Wall Street into the red. The Dow Jones index of standard values closed around one percent lower on Wednesday at 35,282 points. The tech-heavy Nasdaq fell 2.2 percent to 13,973 points. The broad S&P 500 lost 1.4 percent to 4513 points.
The US rating agency downgraded the credit rating by one notch from the top rating “AAA” to “AA+” on Tuesday evening and justified this with a deterioration in the budget situation.
“The debt problem in the USA of all things and a downgrading by the rating agency Fitch, which came as a surprise at the time, abruptly ended the euphoria of investors about the upcoming interest rate peak, a recession that might not happen after all and the easing of inflationary pressure,” said Konstantin Oldenburger, analyst at broker CMC Markets.
But analysts were divided on how the downgrade would affect the market over the long term. “This happened once before, in 2011, at that time by the agency Standard and Poor’s. As a result, the Dax fell 25 percent in a few days,” warned Jürgen Molnar, strategist at broker RoboMarkets.
Other experts were calm. “The lack of reaction from the dollar index suggests the market has already weighed the risk,” said Sophie Lund-Yates, chief analyst at investment firm Hargreaves Lansdown. In addition, Fitch’s decision is partly based on outdated data, especially in view of the recently significantly lower inflation.
The dollar index built back its initial losses and advanced by 0.6 percent to 102.64 points. In return, the euro lost 0.4 percent.
Oil price falls into the red
Meanwhile, oil prices turned negative. The North Sea variety Brent and the light US variety WTI reduced their initial profits in view of the surprisingly high US inventories and fell by around two percent to 83.45 and 79.74 dollars a barrel respectively. “Gasoline demand appears to have peaked after higher prices at the pump,” said Edward Moya, chief analyst at trading house Oanda.
The uncertainty affected growth stocks such as Tesla, Microsoft, Nvidia and Meta. The papers of the electric car manufacturer, the software giant, the chip manufacturer and the Facebook parent company fell between 2.6 and 4.8 percent.
Look at other individual values
Starbucks: The papers turned positive after initial price losses and gained almost one percent. The world’s largest coffeehouse chain missed expert expectations for sales, but saw a strong recovery in its China business.
AMD: The papers of the chip manufacturer lost more than seven percent. Analysts worry the company’s goals for its AI chip may be too ambitious. The prospect of a sales boom for the new AI special chip had initially inspired AMD.
According to the company, AI orders increased more than sevenfold in the quarter under review. According to the company, it is making great progress in expanding production of the MI300 processor, which is tailored to the complicated calculations for the operation of artificial intelligence (AI).
Electronic Arts: The video game provider, meanwhile, has disappointed the markets with its outlook. The company says it expects net bookings of just $1.70 billion to $1.80 billion for the quarter ended September 30. Analysts had previously expected an average of $ 1.81 billion. The title slipped by 7.2 percent.
DuPont: The US chemical group is counting on stable demand and is raising its sales forecast. This makes the group one of the few bright spots in the chemical industry, after almost all large listed chemical companies in Germany had to lower their targets. At the same time, however, DuPont also lowered its earnings forecast to $3.40 to $3.50 per share from previously $3.55 to $3.70. The stock fell 1.3 percent.
US stock market expert Koch: “US credit rating downgrade is not the main reason for the price losses”
Kraft Heinz: The US food company significantly increased its profits in the second quarter. While sales grew slightly by 2.6 percent to $6.7 billion thanks to higher prices, profit quadrupled to $1.0 billion. The stock rose 1.34 percent.
US packaged food manufacturers like Kraft Heinz have been raising the prices of their products for a long time, also in the face of rising costs. Customers plagued by inflation therefore looked for cheaper alternatives and increasingly switched to the discounters’ own brands, among other things.
CVS Health: Shares of the pharmacy giant rose 3.02 percent after the company reported strong earnings and revenue for the second quarter. CVS reported earnings of $2.21 per share on sales of $88.9 billion. Wall Street analysts had expected $2.11 per share on sales of $86.5 billion, according to Refinitiv.
Norwegian Cruise Line: The company released its earnings results Tuesday after market close, which included a weaker-than-expected third-quarter guidance. However, the cruise operator beat Wall Street estimates. The stock fell 1.52 percent.
On Wednesday, Susquehanna downgraded its rating on Norwegian shares to neutral from positive. The company maintained its price target of $17, down 12.4 percent from Tuesday’s close.
Solaredge Technologies: The solar company’s stock slipped 17.77 percent after the company missed sales expectations for the second quarter. Revenue came in at $991 million, while analysts polled by Refinitiv were expecting $992 million. However, the company beat earnings estimates, coming in above the $2.52 per share estimate at an adjusted $2.62 per share.
Match Group: Tinder and Match’s parent company’s stock topped Wall Street’s expectations on both earnings and earnings reports. BTIG upgraded the stock to buy from neutral following the report. Investors took profits. The stock lost 0.86 percent.
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