Fitch’s downgrade causes Dow to drop more than 100 points after credit bureau scraps US government’s top credit rating over ‘fiscal deterioration’

Wall Street opened lower on Wednesday after rating agency Fitch misled investors with an unexpected downgrade of the US government’s credit rating.

Shortly after the opening bell, the Dow Jones Industrial Average fell 146 points, or 0.4 percent. The benchmark S&P 500 was down 0.8 percent and the Nasdaq Composite was down 1.1 percent.

On Tuesday, Fitch downgraded the United States’ rating from AAA to AA+, citing expected “fiscal deterioration” over the next three years and high and growing government debt.

It follows Congress’ bitter showdown over the debt ceiling this spring and marked the second downgrade from a major rating agency, following Standard & Poor’s move in 2011 to strip the country of its triple-A rating.

Fitch’s move curbed hunger for risky assets around the world, and tech megacap stocks led the selloff, with Tesla, Nvidia, Meta and Microsoft falling between 0.75 percent and 2.75 percent in early trading.

“We are heading for a lower open as Fitch’s downgrade is causing a bit of a sell-off,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

“All that is important is that it is a wake-up call for the politicians because of long-term agreements and fiscal irresponsibility.”

Also weighing on investor sentiment, ADP’s private payrolls report came out hotter-than-expected Wednesday morning, with July jobs gaining 324,000 versus the 175,000 economists had expected.

Due to the continuing tightness in the labor market, there are fears that the Federal Reserve will be able to keep interest rates high for longer, which will put pressure on growth.

On the other hand, corporate earnings this year beat expectations, suggesting an expected slowdown is better than feared.

US earnings for the second quarter are now expected to fall 5.9 percent from a year earlier, according to data from Refinitiv, compared to a 7.9 percent decline estimated a week earlier.

The benchmark S&P 500 and the tech-heavy Nasdaq took a breather in the previous session as investors entered a seasonally sluggish August.

The blue-chip loaded Dow ended higher, supported by gains in Caterpillar after the global economic gauge posted bullish quarterly gains.

Fitch’s move reduced hunger for risky assets around the world, and tech megacap stocks led to a sell-off. Pictured: Traders work on the floor of the New York Stock Exchange last week

The international credit rating agency, which has offices in London, pictured here, and in New York City has made the move to downgrade the US credit rating

Among other early movers, Starbucks eased 1.1 percent after the world’s largest coffee house chain fell short of market expectations for quarterly comparable sales.

CVS Health Corp lost 0.9 percent even as it reported optimistic second-quarter results, saying it had begun implementing a restructuring program to cut costs following a recent spate of acquisitions.

DuPont de Nemours fell 1.4 percent after reporting a 7 percent drop in quarterly revenue due to weakness in the electronics and industrial unit.

Emerson climbed 4.8 percent after the industrial software company raised its annual profit forecast as companies increased spending on automation in response to a tight labor market.

Wells Fargo said it expects to pay as much as $1.8 billion to help replenish a government deposit insurance fund that was drained for $16 billion this year after three banks collapsed, sending its shares down 0.9 percent .

Developing story, more to come.