Catenaa, Monday, May 19, 2025- US Stocks fell on Monday after Moody’s downgraded the US credit rating last week, causing Treasury yields to spike.
The Dow Jones Industrial Average was down by 0.15% or 65 points, the S&P 500 was down by 0.4%, while the Nasdaq Composite shed 0.5%.
On Friday, Moody’s downgraded the US credit rating down one notch to Aa1 from AAA, bringing the agency in line with peers. The firm cited financing challenges tied to the federal government’s growing budget deficit and the ramifications of rolling over existing US debts in a period of high borrowing costs.
The debt downgrade pressured bond prices, sending yields higher. The 30-year US bond yield traded above 5% on Monday before coming down to 1.3% by 10.15 am, the 10-year yield topped 4.5%, levels that hurt equity markets last month and helped lead Trump to back off his stiffest tariff measures.
Leading the equity losses on Monday were key tech stocks that would be hurt the most if rising yields slowed the economy and hurt investors’ risk appetites. Palantir was down by 3.2%, Tesla by 3.3%, and Apple by 1.8%.
The rating downgrade comes after a winning week on Wall Street as investors cheered the White House’s deal with China to temporarily slash levies. The agreement was seen as a breakthrough for global trade after Trump’s initial plan for broad and steep import taxes was unveiled last month.
The technology-heavy Nasdaq Composite led the way last week, surging more than 7%. The broad S&P 500 jumped over 5% and posted a five-day winning streak. The blue-chip Dow rallied more than 3% last week. Friday’s gain of over 300 points pushed the 30-stock average into positive territory for 2025.
