The U.S. stock futures took a hit on Wednesday after the credit rating of the U.S. government was downgraded, shaking up the markets.
How are stock-index futures trading?
- S&P 500 futures (ES00) dipped 42 points, or 0.9%, to 4559.
- Dow Jones Industrial Average futures (YM00) fell 257 points, or 0.7%, to 35500.
- Nasdaq 100 futures (NQ00) lost 204 points, or 1.3%, to 15613.
On Tuesday, the Dow Jones Industrial Average (DJIA) rose 71 points, or 0.2%, to 35631, while the S&P 500 (SPX) declined 12 points, or 0.27%, to 4577. The Nasdaq Composite (COMP) also dropped 62 points, or 0.43%, to 14284.
Credit rating downgrade causes market anxiety
The credit rating downgrade by Fitch has led to a broad risk-off sentiment in the equity-index futures market. Fitch downgraded the U.S. credit rating from AAA to AA+, citing “expected fiscal deterioration” and an “erosion of governance.” This follows a similar downgrade by S&P more than a decade ago.
The U.S. Treasury market serves as a global benchmark for many financial products, so any uncertainty regarding its stability can make investors anxious.
Unease in an already vulnerable stock market
This news comes at a time when the stock market is arguably vulnerable to unwelcome surprises. The S&P 500 has already gained 19.2% this year, and the tech-heavy Nasdaq Composite is up by an even higher percentage at 36.5%.
Rise in expected volatility
The CBOE VIX Index, which gauges the expected volatility of the S&P 500 based on options, saw a significant jump of 16% to 16.2. This is its highest level in nearly four weeks.
Overall, the downgrade in credit rating has had a negative impact on U.S. stock futures, adding to the existing uncertainty and volatility in the market.