Fitch downgrades the credit rating of the United States

Fitch downgraded the credit rating from AAA to +AA

By Raed Alkhedr | @raedalkhedr | 2 August 2023

July _ S&P500
  • US indicators declined following the credit rating downgrade of the United States

  • The main reason for the credit rating downgrade was the increasing debt of the United States

  • The S&P 500 index is approaching the support level of 4535 points

Economic events affecting movements in the US stock market indices

US stock indices concluded the first session of August with notable fluctuations. The Dow Jones index experienced an uptick, while the Nasdaq and S&P 500 indices witnessed a decline. This movement can be attributed to several factors, including the release of weak economic data, a decline in risk appetite, and market anticipation surrounding the upcoming release of US labor market data scheduled for the end of this week.

Concerning the economic data, the Bureau of Labor Statistics revealed that job vacancies in June reached 9.58 million, slightly lower than the previous reading of 9.62 million. Additionally, the US Manufacturing Purchasing Managers' Index rose to 46.4 points in July, up from 46.0 in June.

The global credit rating agency "Fitch" downgraded its credit rating for the United States from AAA to +AA, citing concerns about increasing debt levels at various government levels. Fitch also pointed out that rising debt and financial conditions have contributed to this downgrade, despite an agreement reached by the Republican and Democratic parties in June to suspend the debt ceiling until January 2025.

Futures contracts for US stock indices experienced a significant decline during pre-market trading, with S&P 500 futures contracts falling by approximately 0.91%, reaching levels near 4535 points.

Key technical and pivotal levels for the S&P 500 index

After the index successfully rose to test the resistance level of 4600 points, it faced a setback as it failed to surpass that level. Subsequently, the index quickly retraced to test the support level of 4535 points. If it manages to hold this level as a strong support, there is a possibility that the index will resume its upward trajectory, attempting to test the resistance level of 4600 points once more. Should it surpass this level, the upward trend could potentially extend to the level of 4800 points.

On the other hand, if the index experiences a decline and breaches the support level of 4535, this could trigger further declines, leading to a test of the next support level at 4460 points. In the event of a break below this level, the decline may extend to the level of 4380 points.

S&P 500 8-2-2023