Fitch cites January 6 riot in US credit downgrade

U.S. political instability reflected in the January 6, 2021, insurrection at the Capitol was a factor in the downgrading of U.S. debt by Fitch, an official for the ratings agency told Reuters.

Fitch downgraded its issuer default rating for the U.S. on Tuesday evening, surprising investors, roiling equity markets and sending bond yields higher on Wednesday morning. 

The agency cited the “erosion of governance” and “fiscal deterioration over the next three years” as reasons for the downgrade, also mentioning the debt ceiling default that nearly crashed the U.S. and global economy in June.

"You have the debt ceiling, you have Jan. 6. Clearly, if you look at polarization with both parties ... the Democrats have gone further left and Republicans further right, so the middle is kind of falling apart basically," Richard Francis, a senior director at Fitch, told Reuters.

Equity markets dipped Wednesday morning following the downgrade.

The Dow Jones Industrial Average of major U.S. stocks was down more than 200 points or 0.62 percent, the S&P 500 index fell more than 42 points or 0.92 percent, and the technology-heavy Nasdaq index fell more than 220 points, losing more than one-and-a-half percent of its value in early trading.

This is a developing story and will be updated.