US Credit Rating Downgrade Hits Futures

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The VIX is getting a bit of life, popping back above $15 as headlines hit regarding the US credit downgrade from Fitch. Since June, the VIX has closed above $15 just once.

“Fitch Ratings has downgraded the United States' long-term rating to AA+ from AAA, echoing a move made by S&P Global Ratings, which cut its rating for the U.S. in 2011 after a different government standoff.”

Of course, this caused an overnight flush. At the Globex low, the ES was down about 50 points from its 4:00 p.m. ET print. So far, they are buying the dip, but the ES is still down about 22 handles or 0.50% as of 7:30 a.m. ET.

It’s been a quiet start to August until that news dropped. Now we’ll see if that will be enough to “shake the tree” and get us a larger pullback or if it will be business as usual for the S&P, which has rallied for five straight months.

Elsewhere, bonds remain quite weak. The 10-year yield ended the day above 4% yesterday, while the 2023 high is up near 4.09%. It’s closed above 4% just five times this year. This has /ZB and the TLT at their lowest levels of the year, as some begin to wonder if and when a 4%+ 10-year yield is going to be a problem for equities.

Tomorrow, we get earnings from AAPL and AMZN.