Trump shutdown threat, ratings-downgrade fears rattle Wall St.
Wall Street was reminded Wednesday that political brinkmanship in Washington remains a market risk after President Trump threatened to shut down the government.
The threat prompted a ratings agency to say the nation’s top-rated credit could come under review if lawmakers failed to raise the amount of money the country can borrow to pay its bills.
The twin threats weighed on markets Wednesday. The Dow Jones industrial average fell almost 90 points after Tuesday’s nearly 200-point rise, and the U.S. dollar slipped 0.3%.
Investors are on edge as two key deadlines tied to the U.S. government’s finances approach.
One of them is Congress agreeing on spending levels for fiscal year 2018 to avoid a government shutdown in October. In a speech Tuesday, the president threatened to shut down the government if he did not get funding to build the wall along the nation’s southwest border, which raised investor uncertainty.
The more serious threat to markets is if Congress doesn’t raise the nation’s debt ceiling — or the amount of money it can borrow to meet its legal obligations — in time to avoid running out of cash in October.
Fitch Ratings on Wednesday warned of the consequences of Congress not boosting the nation’s borrowing limit in a “timely manner.” Fitch has a top AAA rating on U.S. debt.
“Brinkmanship over the debt limit could ultimately have rating consequences, as failure to raise it would jeopardise the Treasury’s ability to meet debt service and other obligations,” Fitch wrote in its report.
Senate Majority Leader Mitch McConnell, R-Ky., said Monday there was “zero chance” the U.S. would fail to raise the debt ceiling. A debt ceiling fight in August 2011 dragged on so long that Standard & Poor’s, another credit agency, downgraded the nation’s top rating, causing a one-day plunge in the Dow of nearly 635 points.