Traders at the New York Stock Exchange faced turmoil on Monday as stock futures plummeted following Moody’s downgrade of the U.S. credit rating. This decision sent Treasury yields soaring, with futures linked to the Dow Jones Industrial Average falling by 292 points, or 0.7%. The S&P 500 futures experienced a 1.1% decline, while Nasdaq-100 futures dropped by 1.5%.
On Friday, Moody’s lowered the U.S. rating from Aaa to Aa1, aligning it with other credit agencies. The downgrade was prompted by financing challenges associated with the federal government’s expanding budget deficit and the implications of refinancing existing U.S. debt amid rising borrowing costs. The downgrade further pressured bond prices, resulting in higher yields—a situation detrimental for an economy already strained by ongoing tariff policies under President Donald Trump. The yield on the 30-year U.S. bond surpassed 5% on Monday, while the 10-year yield exceeded 4.5%, levels that previously impacted equity markets and prompted changes in Trump’s tariffs. These yields influence loan rates for mortgages, auto loans, and credit cards.
Peter Boockvar, chief investment officer at Bleakley Financial Group, commented on the downgrade, stating, “The fundamental factor of less foreign demand for them and the growing size of the pile of debt that needs to be constantly refinanced is not going to change.” He emphasized the symbolic nature of Moody’s downgrade, highlighting the agency’s recognition of the U.S.’s problematic debts and deficits.
Among the leading premarket losses were major tech companies, which could be most adversely affected if rising yields dampen economic growth and investor risk appetite. Notably, Palantir shares dropped by 4%, Tesla fell by 3%, and Nvidia lost over 2%.
This downgrade arrives on the heels of a positive week on Wall Street, where investors rallied following the White House’s agreement with China to temporarily reduce tariffs. The deal was viewed as a crucial step for global trade after the initial introduction of steep import taxes by Trump last month. The technology-driven Nasdaq Composite emerged as the biggest winner last week, rising over 7%, while the broader S&P 500 saw a surge of more than 5%, marking a five-day winning streak. The blue-chip Dow also gained over 3% last week, with a Friday increase of more than 300 points pushing it into positive territory for 2025.
Market observers now consider ongoing trade agreements essential to sustaining the stock market’s recovery, although there are concerns that rising yields could deter investor confidence. The atmosphere remains tense, as traders adjust to these economic signals that could significantly impact their strategies in the weeks ahead.
In a landscape marked by financial uncertainty, the reactions to Moody’s downgrade reflect broader anxieties about the U.S. economy’s resilience and the potential shifts in investor behavior as global trade dynamics evolve.
Original Source: https://www.cnbc.com/2025/05/18/stock-futures-slide-after-us-debt-downgrade-highlights-deficit-risk-live-updates.html
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Publish Date: 2025-05-19 16:42:00
