Fitch's Get Stitches

While it may be tempting to praise the credit ratings agency, Fitch Ratings, for its recent downgrade of U.S. debt as being an admirable display of courage and integrity, I am willing to bet they had plenty of other reasons for making the move, too.

Fitch, of course, got publicity from it. They also cement a ton of of ye-olde "covering one's backside" in case we are, in fact, on the doorstep of a full-blown sovereign debt crisis--2008 saw the ratings agencies be figuratively tarred and feathered in town square, after the fact, for their lack of proactive downgrades during subprime. 

Regardless of their true intentions or motivations, you have to respect the heat that Fitch knew it would take, and is currently taking, in full public view. Some of the heaviest hitters in finance and politics are taking serious shots at Fitch, as it clearly upsets the apple cart. 

As for the market's reaction, I remarked for Members in the usual Morning Prep Video that we had a tug-of-war playing out early on: AAPL weakness versus AMZN strength. The jobs report coming in cool (disinflationary, generally speaking) but also seeing higher wages and a lower unemployment rate overall (inflationary, generally speaking). 

And as I am writing this now we are seeing a pretty substantial fade in equities off session highs, with the S&P red and the Nasdaq almost there. 

Next week is sure to focus on the CPI, a much more pronounced inflation reading than praising the jobs report. I still expect a hot number given the base effect (year over year) resetting in July as well as commodities like gasoline rallying for much of this summer. 

In sum, inflation has not likely been conquered and the pain trade in rates is higher. Long duration assets like widely expensive tech and growth stocks are still in la-la-land but may finally be slowly acknowledging reality this week.