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What you need to know today
Asian markets plunge
U.S. stocks traded mixed Tuesday, with the Dow Jones Industrial Average, once again, outperforming other major indexes. Asia-Pacific markets fell Wednesday as sentiment sank after Fitch cut the U.S.'s credit rating. Japan's Nikkei 225, South Korea's Kospi Index and Hong Kong's Hang Seng Index declined by as much as 2% throughout the day.
Credit rating cut
Fitch Ratings downgraded the United States' long-term foreign currency issuer default rating from AAA to AA+. "In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters," said the ratings agency. Fitch also forecast the possibility of a "mild" U.S. recession in the fourth quarter this year. Stock futures slid on the news.
Third indictment for Trump
Former U.S. Donald Trump was criminally charged Tuesday in connection with his efforts to reverse his loss to President Joe Biden in the 2020 presidential election. That's the third criminal indictment against Trump. No other U.S. president, current or former, has ever faced criminal charges.
Food prices heating up
Malaysia's reliance on Indian rice means it's most vulnerable to India's ban on exports of non-basmati white rice, according to an analysis by Barclays. But many other Asian, Middle East and African nations will be affected too. With both rice and wheat prices jumping in recent weeks, analysts are worried food prices globally will rocket.
[PRO] Where pros would invest $100,000 now
The stock market has surged this year, but that came as a surprise because of slowing economic growth and high interest rates. Little wonder that many are expecting stocks to fall later in the year. So where should an investor with a budget of $100,000 put their money now? In these assets, according to investment managers and wealth advisors.
The bottom line
Despite the S&P 500's five-month rally, some market bears refuse to concede. And numbers yesterday might back them up.
JPMorgan strategist Marko Kolanovic thinks stocks are pricing in a scenario where the economy continues running hot while monetary policy loosens. (In Goldman Sachs' Scott Rubner's words, "positioning and sentiment … is Euphoric.") But Kolanovic is skeptical that hoped-for outcome will happen. Instead, the bank "anticipat[es] the inflation decline to prove incomplete, leaving restrictive policies in place that should increase private sector vulnerabilities and end the global expansion," Kolanovic wrote.
It's a warning echoed by Adam Phillips, managing director at EP Wealth Advisors. "We've seen progress, that's all well and good, but let's not celebrate just yet," he said, pointing out that gas prices are at monthlong highs, which might cause prices to rise again.
Even Rubner, not a typical market bear, acknowledged the inescapable pull of gravity. "I am so bullish, that I am actually bearish now for August. I am looking for a small-ish equity market correction in August," he said in a Monday note.
Movements of major indexes back those analysts' comments. The S&P fell 0.27% and the Nasdaq Composite slid 0.43%. But the Dow Jones Industrial Average eked out a 0.2% gain and even touched its highest level since February 2022 during the session.
Separately, U.S. manufacturing activity in July contracted for a ninth straight month, according to the ISM manufacturing Purchasing Managers' Index. Employment vacancies in June totaled 9.58 million, according to a Labor Department report. That figure dipped slightly from the 9.62 million in May and is the lowest since April 2021.
In another sign of waning confidence in the U.S. economy, Fitch downgraded the U.S. government's credit rating from AAA to AA+.
Still, with more than half of S&P companies reporting earnings, 82% have exceeded earnings expectations, according to FactSet. Investors will hope corporate America can keep the metaphorical bull charging.
