Dow futures retreat after Fitch downgrade; ADP jobs data due By

© Reuters. — U.S. stock futures fell Wednesday after the surprise downgrading of the country’s top-tier credit rating by Fitch, while the quarterly corporate earnings season continues.

By 06:30 ET (10:30 GMT), the contract was down 175 points, or 0.5%, traded 32 points, or 0.7%, lower and dropped 160 points, or 1%.

Fitch downgrade hits sentiment

Risk sentiment took a hit after Fitch downgraded the U.S. government’s credit rating to AA+ from AAA late Tuesday, citing likely fiscal deterioration over the next three years and repeated fraught debt ceiling negotiations.

Fitch became the second major rating agency after Standard & Poor’s move to strip the United States of its triple-A rating in 2011, but this decision brought a sharp response from the U.S. government, with Treasury Secretary Janet Yellen calling it “arbitrary and based on outdated data.”

After the initial losses, “markets will likely see it in a similar way (i.e. strictly tied to the debt ceiling standoff) especially in a week full of important data releases and with the next Federal Reserve rate hike hanging in the balance,” said analysts at ING, in a note.

Earnings season continues

The main Wall Street indices suffered a lackluster start to the new month, with the blue chip gaining 70 points, or 0.2%, on Tuesday, while the broad-based fell 0.3% and the tech-heavy dropped 0.4%.

However, strong earnings have largely helped stocks this reporting season, with around 82% of the S&P 500 companies that have reported posting positive surprises, according to FactSet data. 

Pharmacy chain and health provider CVS Health (NYSE:), fast food corporation Yum! Brands (NYSE:) and health insurer Humana (NYSE:) are set to report earnings before the open Wednesday, while chipmaker Qualcomm (NASDAQ:) and website platform Shopify (NYSE:) are scheduled after the close.

Elsewhere, Advanced Micro Devices (NASDAQ:) stock rose premarket after the chipmaker forecast that the release of its artificial intelligence chips will drive up its annual results. 

Starbucks (NASDAQ:) stock fell premarket after its global comparable sales missed estimates, as demand for the Frappuccino maker’s drinks and food showed signs of slowing in North America. 

More labor data due for release

Turning to economic data, the July is due for release before the open, and investors will be looking for clues ahead of Friday’s official .

The Fed won’t meet to decide on rates again until September, and Chair Jerome Powell pointed out last week the importance of upcoming data in helping the policymakers decide upon the future path of interest rates.

Crude rises after U.S. inventories slump

Oil prices rose Wednesday, near to their highest levels since April, after industry data pointed to a hefty fall in U.S. inventories, indicating robust demand from the world’s biggest fuel consumer.

Data from the , released on Tuesday, showed that U.S. crude inventories shrank by 15.4 million barrels in the week to July 28, the largest draw seen in data stretching back to 1982.

Official data, from the , are due later in this session, for confirmation.

By 06:30 ET, the traded 0.6% higher at $81.84 a barrel, while the contract climbed 0.5% to $85.33. 

Additionally, rose 0.4% to $1,986.70/oz, while traded 0.1% lower at 1.0972.

(Oliver Gray contributed to this article.)


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