Modifying README File

Attempting to modify the README file, but receive this message instead:
fatal: bad source, source=first_app/README, destination=first_app/README.markdown

Now I get this when I try to get a git status:
git status
# On branch modify-README
# Untracked files:
#   (use "git add <file>..." to include in what will be committed)
#
#    ../.CFUserTextEncoding
#    ../.DS_Store
#    ../.Trash/
#    ../.Xauthority
#    ../.bash_history
#    ../.bash_profile
#    ../.bashrc
#    ../.fontconfig/
#    ../.gitconfig
#    ../.ssh/
#    ../.zprofile
#    ../.zshrc
#    ../Desktop/
#    ../Documents/
#    ../Downloads/
#    ../Google Drive/
#    ../Library/
#    ../Movies/
#    ../Music/
#    ../Pictures/
#    ../Public/
#    ../first/
#    ../rails_projects/
nothing added to commit but untracked files present (use "git add" to track)

When I should be geting this:
git status
# On branch modify-README
# Changes to be committed
#      (use "git reset HEAD <file>..."to unstage)
#
#renamed: README ->README.markdown
#
#Changed  but not updated:
#     (use "git add <file>..." to update what will be committed)
#     (use "git checkout -- <file>..." to discard changes in working directory)
#
#     modified: README.markdown