On Monday, US stocks experienced modest gains, rebounding as bond yields receded from previous highs, while Wall Street appeared largely unfazed by Moody’s recent downgrade of the US credit rating. The Dow Jones Industrial Average rose by 0.3%, and the S&P 500 maintained its momentum, extending its winning streak to five days. The Nasdaq Composite also witnessed a slight uptick.
Moody’s decision to lower the US government’s long-term credit rating from AAA to AA1 was announced late Friday, primarily due to rising deficits and the challenges of refinancing US debt amid high-interest rates. This downgrade aligns Moody’s rating with those of Fitch and S&P, which had already removed the US’s top-tier status.
Despite this downgrade, stocks continued their positive trajectory, with attention focused on the complexities surrounding the Republican tax-and-spend bill. Meanwhile, longer-dated Treasury yields had previously surged, with the benchmark 10-year yield nearing the 4.5% threshold, while the 30-year yield surpassed 5% for the first time since late 2023 before reverting.
In tariff-related developments, Treasury Secretary Scott Bessent emphasized the need for positive negotiations during a 90-day pause, warning countries that previous import tariff hikes could resume if agreements are not reached. Concurrently, President Trump criticized retail giant Walmart on social media, pressuring the company to absorb the impacts of tariff policies and highlighting ongoing tensions with major corporations over economic strategies.
This week’s economic calendar appears light, with investors keeping an eye on upcoming manufacturing data and initial jobless claims reports. As the earnings season progresses, major retail players like Target and Home Depot are expected to report their performance later this week, adding to market sentiment.
This mixture of corporate earnings, tariff discussions, and the state of the US credit ratings contributes to a dynamic economic landscape, prompting investors to anticipate what the near future may hold.