US markets fell in Wednesday trading following the downgrade of US debt from the highest AAA rating to AA+ by rating company Fitch.
Fitch cited "a steady deterioration in standards of governance" as a major reason behind its decision on Tuesday evening.
A major sell-off, led by the technology sector, followed.
The Dow closed 348 points, or 1%, lower in Wednesday trading. The S&P 500 fell 1.4% and the Nasdaq dropped 2.2%, marking its worst performance since February.
The 10-year Treasury yield hit its highest level since November. Bond prices and yields move in opposite directions, so falling Treasuries boost yields.
Tech megacap stocks like Amazon, Meta, Microsoft, Tesla, Nvidia and Apple led market declines. Because the tech sector is so forward-facing, it’s particularly sensitive to interest rate changes.
Earnings season, meanwhile, is more than halfway through. About 82% of S&P 500 companies have beaten expectations, according to FactSet data.
CVS was up nearly 3.3% after beating earnings expectations Wednesday morning.
Kraft Heinz, meanwhile, also rose more than 1.2% even after reporting that higher prices had led to a slowdown in consumer demand.
Shopify, PayPal, Occidental Petroleum, MetLife, DoorDash, Clorox, MGM Resorts, Marathon Oil, Zillow, Etsy and Robinhood report earnings after market close.
August is a historically bad month for markets because so many investors take vacations and there are decreased trading volumes. This reduced activity can lead to increased volatility.