The S&P 500 recorded its third consecutive day of declines on Thursday as longer-dated Treasury yields surged following the U.S. downgrade by Fitch Ratings.
Stock Performance
The Dow Jones Industrial Average (DJIA) witnessed a decrease of approximately 67 points, or 0.2%, closing near 35,215, according to preliminary FactSet data. Similarly, the S&P 500 index fell by 0.3%, and the Nasdaq Composite Index shed 0.1%.
Concerns Over U.S. Credit Worthiness
With the nation’s credit worthiness at the center of debate, investors remained cautious while monitoring U.S. economic data. Fitch’s decision to lower its U.S. ratings to AA+ from AAA on Tuesday marked the second downgrade by a major rating agency in the past twelve years.
Rise in Long-term Treasury Yields
Investors closely monitored the surge in long-term Treasury yields. The 10-year rate climbed to 4.188% on Thursday afternoon, and the 30-year Treasury yield reached around 4.304%, marking the highest yield for both since November 2022, as reported by Dow Jones Market Data.
Impact on Equity Market
Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, shared his concerns over climbing long-term rates, stating, “I think everyone is watching interest rates after the Fitch downgrade. That’s troubling for the equity market because it makes it more expensive to borrow.” However, Pavlik also suggested that the stock sell-off could be short-lived, referencing the buying opportunity that arose from the S&P downgrade of the U.S. to AA+ approximately a decade ago.
Future Earnings Reports
Investors will also be eagerly awaiting quarterly earnings reports from Apple Inc. (AAPL) and Amazon (AMZN), which are scheduled to be released after the closing bell on Thursday.