The S&P 500 index fell 2.3% last week, starting August on a negative note as Fitch Rating downgraded its credit rating on the US to one notch below the top AAA grade, citing an “erosion of governance,” and July nonfarm payrolls missed expectations.
The decline comes after the index locked in a 3.1% increase for July, marking its fifth consecutive month in positive territory. Despite this week’s slide, the market benchmark is up 17% so far this year.
The downgrade of the US credit rating by Fitch to AA+ startled investors as it represents the country’s first downgrade by a major ratings firm since 2011. It comes about two months after the US came close to a default that was ultimately averted after lawmakers agreed to raise the debt ceiling.
The US is still rated AAA by the other major ratings firms — Standard & Poor’s and Moody’s — and Treasury Secretary Janet Yellen called the change by Fitch “arbitrary and based on outdated data.”
July jobs data released Friday showed fewer people than expected began working last month as an acceleration in service industry gains was partially offset by a slowdown in the goods-producing sector. Nevertheless, the unemployment rate inched down to 3.5% last month from 3.6% in June and 3.7% in May. The market view was for 3.6%.
Related: July 2023 Jobs Report: US Economy Added 187,000 Jobs
Some companies’ quarterly results added to investor concerns. Among them, technology giant Apple’s (AAPL) fiscal Q3 revenue barely met the Street’s consensus estimate. Semiconductor and wireless telecommunications company Qualcomm’s (QCOM) fiscal Q3 revenue missed analysts’ mean estimate amid declines in its semiconductor and licensing businesses.
The utilities sector had the largest percentage drop of the week, falling 4.7%, followed by a 4.1% slide in technology and a 2.9% drop in communication services. The only sector that managed to end the week in positive territory was energy, up 1.1%.
On the upside, the energy sector’s gainers included APA Corp. (APA), which reported Q2 adjusted earnings per share and revenue above analysts’ mean estimates. Shares rose 4.3%.
This week’s earnings calendar features Eli Lilly (LLY), United Parcel Service (UPS), Walt Disney (DIS) and Duke Energy (DUK).
Economic reports will include key inflation data, with the July consumer price index set to be released on Thursday and the July producer price index expected on Friday.
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July 2023 Jobs Report: US Economy Added 187,000 Jobs