Yesterday, one ratings agency affirmed Disney’s credit rating — today another has downgraded the long-term credit rating of the entire United States, sinking media stocks and broader markets.

In a rare move. and a bit of a black eye for the U.S., Fitch lowered its rating on government debt from AAA to AA+, citing fiscal and political uncertainty.

Heading into the close, the DJIA shed 340 points, or nearly 1%. The Nasdaq is down by 2.2%, the S&P 5oo by 1.39% and the Russell 2000 by 1.3%. Nasdaq-listed tech stocks are uniformly in the red with Meta, Amazon, Alphabet and Apple off, respectively, by 3%, 2.79%,2.5% and 1.7%. Roku and Snap are taking a hit. Netflix is down 2.2%.

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Shares of Warner Bros. Discovery, which reports quarterly earnings tomorrow morning, are down 2.44%. Disney is off by 3%. Paramount Global by 2.7%.

A displeased Treasury Department called the downgrade “abritrary,” since the White House and Congress had agreed in June to a debt ceiling deal. But Fitch cited a risk of ongoing debt-ceiling drama alongside an erosion of governance.

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” according to the Fitch report. See main points of report below.

“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 Ratings, told Reuters.

On Tuesday, former president and 2024 Republican frontrunner Donald Trump was indicted by a Federal grand jury for conspiracy for trying to overturn the results of the 2020 U.S. presidential election.

The last time the U.S. credit rating was hit was in 2011 under President Obama. Standard & Poor’s cut to AA+ from AAA, also just after Washington had managed to avoid a default, and also citing political risk.

Here’s a bit from the Fitch report:

Ratings Downgrade: The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.

Erosion of Governance: In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025. The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management. In addition, the government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process. These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade. Additionally, there has been only limited progress in tackling medium-term challenges related to rising social security and Medicare costs due to an aging population.

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