The JPY is the strongest and the NZD is the weakest as the North American session begins

Forex — The strongest to weakest of the major currencies

The JPY is the strongest and the NZD is the weakest as the NY session begins.

The big news overnight is that after the 5 pm close, Fitch downgraded the long-term credit rating of the United States from AAA to AA+. The decision was driven by anticipated fiscal deterioration over the next three years, increasing general government debt, and a decline in governance standards over the last two decades. The downgrading reflects concerns about repeated debt limit standoffs, last-minute resolutions, and a lack of a medium-term fiscal framework. The ongoing political standoffs over the debt limit and last-minute resolutions have undermined confidence in fiscal management.

The report adds that the US general government deficit is expected to rise from 3.7% in 2022 to 6.3% in 2023 due to weaker federal revenues, new spending initiatives, and a higher interest burden. By 2025, the debt-to-GDP ratio is projected to rise to 118.4%, significantly higher than the median of both AA and AAA rated countries. Despite these challenges, several structural strengths underpin the United States' ratings, including a large, advanced, diversified and high-income economy, and the status of the U.S. dollar as the world's preeminent reserve currency, which grants the government extraordinary financing flexibility.

Fitch predicts that the U.S. economy will fall into a mild recession in the fourth quarter of 2023 and the first quarter of 2024 due to tighter credit conditions, weakening business investment, and a slowdown in consumption. This is further complicated by higher job vacancies and a lower labor participation rate compared to pre-pandemic levels. The Federal Reserve's decision to raise interest rates in March, May, and July 2023, with one further hike anticipated by September, aims to bring inflation towards its 2% target. However, stubbornly high inflation rates and the resilience of the economy are complicating this goal.

Yields have actually declined. The USD is mostly higher. HMMMM. Analysts are leaning on the side of "not much impact" side. What is clear is it is a warning shot over the bow for the US government to shape up.

Bank of America shifted their assessment today saying they no longer look for a US recession.

Stocks are marginally lower. Back on August 5th, 2011 when S&P downgraded the US debt the S&P was already in the midst of a 10-20% decline. The two-days after the hike, the price moved down -8.16%. The reaction today is very minor in comparison.

S&P fell 8.16% the two days after the last downgrade

Moving on, in after-hours earnings yesterday, 7 of 11 BEAT on both the EPS and Revenues:

American International Group Inc (AG): BEAT, EPS 1.75 vs 1.59 expected
Advanced Micro Devices Inc (AMD): BEAT, EPS 0.58 vs 0.57 expected, Revenue 5.36 billion vs 5.31 billion expected
Devon Energy Corp (DVN): MISSED, EPS 1.18 vs 1.19 expected, Revenue 3.454 billion vs 3.74 billion expected
Match Group Inc (MTCH): BEAT, EPS 0.49 vs 0.45 expected, Revenue 844 million vs 811.4 million expected
Mosaic Co (MOS): MISSED, EPS 1.04 vs 1.12 expected, Revenue 3.39 billion vs 3.12 billion expected
Pinterest Inc (PINS): BEAT, EPS 0.21 vs 0.12 expected, Revenue 708 million vs 699.4 million expected
VF Corp (VFC): MISSED, EPS -0.15 vs -0.11 expected, Revenue 2.10 billion vs 2.07 billion expected
Starbucks Corp (SBUX): MISSED, EPS 1.00 vs 0.95 expected, Revenue 9.20 billion vs 9.29 billion expected
Electronic Arts Inc (EA): BEAT, EPS 1.47 vs 1.02 expected, Revenue 1.924 billion vs 1.59 billion expected
Caesars Entertainment Inc (CZR): BEAT, EPS 4.26 vs 0.33 expected, Revenue 2.90 billion vs 2.87 billion expected
Vertex Pharmaceuticals Inc (VRTX): BEAT, EPS 3.89 vs 3.88 expected, Revenue 2.49 billion vs 2.42 billion expected

This morning the summary of the earnings showed 9 of 14 BEAT on both EPS and Revenues:

Spirit AeroSystems (SPR) - MISSED: Adjusted EPS is -1.46 while expected was -0.86; Revenue is $1.37bn while expected was $1.31bn
YUM! Brands (YUM) - BEAT: Adjusted EPS is 1.41 while expected was 1.24
Phillips 66 (PSX) - BEAT: Adjusted EPS is 3.87 while expected was 3.56; Revenue is $35.74bn while expected was $34.55bn
Garmin Ltd (GRMN) - BEAT: Adjusted EPS is 1.45 while expected was 1.41; Revenue is $1.32bn while expected was $1.26bn
Kraft Heinz Co (KHC) - MISSED: Adjusted EPS is 0.79 while expected was 0.76; Revenue is $6.70bn while expected was $6.81bn
Johnson Controls International PLC (JCI) - MISSED: Adjusted EPS is 1.03 while expected was 1.03; Revenue is $7.13bn while expected was $7.2bn
Emerson Electric Co (EMR) - BEAT: Adjusted EPS is 1.29 while expected was 1.10; Revenue is $3.95bn while expected was $3.88bn
Cameco Corp (CCJ) - MISSED: EPS is 0.03 while expected was 0.72 Y/Y; Revenue is $482mn while previous was $558mn Y/Y
Ferrari (RACE IM) - BEAT: Q2 Revenue is €1.47bn while expected was €1.47bn; Net Profits is €334mn while expected was €317mn
AmerisourceBergen Corp (ABC) - BEAT: EPS is 2.92 while expected was 2.82; Revenue is $66.9bn while expected was $63.95bn
Humana Inc (HUM) - BEAT: EPS is 8.94 while expected was 8.82; Revenue is $26.747bn while expected was $26.23bn
CVS Health Corp (CVS) - BEAT: EPS is 2.21 while expected was 2.11; Revenue is $88.9bn while expected was $86.53bn
Bunge Ltd (BG) - MISSED: Adjusted EPS is 3.72 while expected was 2.69; Revenue is $15.05bn while expected was $16.39bn
Dupont Inc (DD) - BEAT: EPS is 0.85 while expected was 0.83; Revenue is $3.09bn while expected was $3.03bn

The ADP national employment data from July will be released shortly with expectations of 189K vs 497K last month. The data has decoupled from the BLS nonfarm pay numbers which last month showed a gain of 209K.

The weekly mortgage data showed:

US Mortgage Refinance Index for week ending 28 Jul is 433.6, previously was 444.5
US MBA Purchase Index for week ending 28 Jul is 154.1, previously was 159.2
US Mortgage Market Index for week ending 28 Jul is 200.7, previously was 206.9
US MBA Mortgage Applications for week ending 28 Jul dropped by -3.0%, previously it dropped by -1.8%
US MBA 30-Yr Mortgage Rate for week ending 28 Jul is 6.93%, previously was 6.87%

The US housing market continues to have issues as supply is too low and rates are too high.

A snapshot of the markets as the NA session gets underway shows:

Crude oil is trading up $0.51 or 0.63% at $81.87
Spot gold is trading up $0.80 or 0.05% at $1951
Silver is trading down up $0.08 or 0.33% $24.39
Bitcoin is trading $29,533. That is up from the level near 5 PM yesterday at $29,191

In the premarket for US stocks, the major indices are trading

Dow Industrial Average is trading down -113 points versus yesterday's 71.15 point rise
S&P index is trading down down -23 points after yesterday's -12.25 point decline
NASDAQ index is trading down -111.76 points after yesterday's -62.11 point decline

In the European equity markets, the major indices are trading after falling yesterday