U.S. stock index futures continue to decline following Moody's credit rating downgrade: Dow futures at one point fell more than 300 points.

Taiwan • Business • 05/19 06:51
U.S. stock index futures continue to decline following Moody's credit rating downgrade: Dow futures at one point fell more than 300 points.

On May 19, 2025, Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1, leading to a decline in U.S. stock futures during the Asian trading session. Dow Jones Industrial Average futures fell by 311 points, S&P 500 futures fell 60 points, and Nasdaq 100 futures declined 278 points. This downgrade sparked market concerns, affecting global stock markets and driving up the prices of safe-haven assets such as gold. U.S. Treasury yields neared 4.5%, becoming a key focus for the market, potentially impacting the flow of funds into the stock market.

Key Updates

05/20 10:51

Moody's downgrade leads to a drop in U.S. stock futures: Dow Jones at 34,800 points, S&P 500 at 4,960 points, Nasdaq 100 at 21,440 points

On May 20, 2025, Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1, leading to a drop in the futures of the three major U.S. stock indices. Dow Jones Industrial Average futures stood at 42,800 points, S&P 500 futures were approximately 5,960 points, and Nasdaq 100 futures were approximately 21,440 points. Concerns over the U.S. fiscal deficit and debt sustainability have intensified, putting pressure on the stock, bond, and foreign exchange markets simultaneously. Despite the recent strong performance of the S&P 500 spot index, the weakness in the futures market reflects investors' cautious outlook on future trends.

05/20 04:48

Retail investors pour into Tesla, Palantir, and Bitcoin ETF: Record buying helps stabilize the US stock market, mitigating the effects of Moody's downgrade.

After Moody's downgraded the U.S. sovereign credit rating, retail investors sparked a record-breaking buying spree on May 19, with a net purchase of $4.1 billion in U.S. stocks, reaching a new all-time high. Tesla, Palantir, and Bitcoin ETF were the primary targets for capital inflow. Despite the S&P 500 index dropping more than 1% in early trading, it recovered due to retail buying, closing up 0.09%. Wall Street analysts recommend that investors see market pullbacks as opportunities to increase their positions.

05/19 22:49

Moody's Downgrades U.S. Credit Rating, U.S. Stocks Rebound Despite the Downgrade: Dow Jones Gains 137 Points, Philadelphia Semiconductor Index Declines

On May 16, Moody's downgraded the U.S. sovereign credit rating from "Aaa" to "Aa1," causing initial market volatility. However, on May 19, the three major U.S. stock indices closed higher despite the trend. The Dow Jones Industrial Average rose by 137.33 points, the S&P 500 inched up 0.09%, the Nasdaq ticked up 0.02%, while the Philadelphia Semiconductor Index fell by 0.50%. Investor sentiment steadied as retail buying supported the market, showing confidence in U.S. assets. In the bond market, the yield on the U.S. 10-year Treasury rose to 4.55%, and safe-haven assets like gold rose 1.54%.

05/19 13:47

CNBC personality Jim Cramer calls out the week's top ten stock market events and five must-know things before Monday's market opens.

On May 19, 2025, Moody's downgraded the United States' sovereign credit rating, leading to a drop in U.S. stock futures, a rise in long-term bond yields, and a withdrawal of funds from risk assets. CNBC host Jim Cramer listed the top ten stock market events for the week, including corporate earnings reports, the impact of the downgrade, and developments in AI technology. The five key points to watch before Monday's market opening provide context, including Moody's downgrade, last week's stock market rebound, Nvidia's new technology, progress on the congressional budget bill, and the tariff dispute involving Walmart and Trump.

05/19 10:50

AI chips are becoming the new global currency: Bank of America is optimistic about Nvidia and AMD, Saudi Arabia's major order highlights the demand for AI infrastructure

A report by the Bank of America indicates that AI chips are emerging as the "new currency" in global geopolitical and economic negotiations, whose strategic value surpasses that of traditional tech products. Saudi Arabia has entered into multi-billion dollar AI infrastructure agreements with NVIDIA and AMD, and global AI infrastructure spending is expected to reach $6.7 trillion by 2030, with chip designers capturing a $3.1 trillion market share. This "sovereign AI" wave led by the Middle East is reshaping the power dynamics of global technology and capital markets.

05/19 06:51

U.S. stock index futures continue to decline following Moody's credit rating downgrade: Dow futures at one point fell more than 300 points.

On May 19, 2025, Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1, leading to a decline in U.S. stock futures during the Asian trading session. Dow Jones Industrial Average futures fell by 311 points, S&P 500 futures fell 60 points, and Nasdaq 100 futures declined 278 points. This downgrade sparked market concerns, affecting global stock markets and driving up the prices of safe-haven assets such as gold. U.S. Treasury yields neared 4.5%, becoming a key focus for the market, potentially impacting the flow of funds into the stock market.

05/18 10:17

Key Drivers of U.S. Stock Market Trends This Week: Trump's Tariff Negotiations, Federal Reserve Policy, Economic Data, Computex Taipei, and Corporate Earnings

Last week, the major U.S. stock indices rebounded, with investors focusing on five key variables: the Trump administration's tariff policy and trade negotiations, the Federal Reserve's policy stance, U.S. economic data, technology information from the Taipei International Computer Show (COMPUTEX 2025), and corporate earnings, especially the growth expectations for tech stocks. These factors will influence the short-term trend of U.S. stocks.

05/17 22:17

Moody's downgrade of U.S. debt leads to an increase in yields, as Trump signs a $2 trillion deal during his Middle East trip, boosting AI and prompting a stock market rebound.

On May 16, 2025, Moody's downgraded the United States' sovereign credit rating from "Aaa" to "Aa1," leading the 10-year U.S. Treasury yield to rise to 4.49%, and U.S. stocks were under pressure after hours. President Trump visited the Middle East that same week, signing economic and arms deals exceeding $2 trillion with Saudi Arabia, the UAE, and Qatar, and facilitated cooperation on AI chips, which boosted tech stocks. Despite the short-term volatility caused by the downgrade, the market remained optimistic due to the strong performance of AI and tech stocks.

05/17 14:27

Lisa Shalett, Chief Investment Officer at Morgan Stanley, warns: The rebound in U.S. stocks might be coming to an end, suggesting a shift from technology stocks to the financial and healthcare sectors.

Morgan Stanley Wealth Management's Chief Investment Officer, Xia Leite, warns that the rebound in U.S. stocks is unlikely to be sustained. She advises investors to realize profits from tech stocks and shift towards industries such as finance, energy, and healthcare, which benefit from regulatory easing. She points out that there is a structural shift in the AI sector, with corporate revenues and free cash flows below expectations, constraining the market's upward potential. Xia Leite's view aligns with changes in market fund flows, indicating an increasing preference among investors for defensive and value-oriented assets.

05/16 22:55

U.S.-China Tariff Deal and Trump's Visit to the Middle East Boosts the Market: Tech Stocks Lead the Gains, All Three Major U.S. Stock Indices Rise

On May 16, 2025, the US stock market closed higher across the board due to a 90-day tariff suspension agreement reached between US-China and a $200 billion trade agreement as a result of President Trump's visit to the Middle East. The Dow Jones Industrial Average rose by 331 points, the S&P 500 Index closed in the green for the fifth consecutive day, and the Nasdaq Composite rose by nearly 100 points. Tech stocks led the rally, with Tesla and Nvidia stocks rising 17% and 16% respectively this week. However, the US consumer confidence index dropped to its second-lowest level on record, and inflation expectations hit their highest level since 1981, contributing to market uncertainty.

Moody's Downgrade Sparks Market Turmoil

Last Friday, international credit rating agency Moody's announced it was downgrading the United States' sovereign credit rating grade from the highest level of Aaa to Aa1, citing the expanding federal budget deficit and the increasing debt burden in a high-interest-rate environment. This rating adjustment brings Moody's in line with Fitch and S&P Global, as none of the three major rating agencies currently grant the U.S. the highest credit rating.

This move immediately impacted the market. U.S. Treasury bond futures prices fell, with the 10-year Treasury bond yield closing at 4.437% last Friday, nearing the critical 4.5% level that the market is closely watching. According to Raymond James, since 2021, a 4.5% yield has been seen as a significant threshold suppressing the performance of large-cap stocks.

U.S. Stock Futures Decline Across the Board

According to a report by MoneyDJ at 12:32 Taipei time, all three major U.S. stock futures indices showed a clear downward trend:

  • Dow Jones Industrial Average futures index was at 42,425 points, down 311 points, a decrease of 0.73%.
  • S&P 500 futures were at 5,915.5 points, down 60 points, a decrease of 1.00%.
  • Nasdaq 100 futures were at 21,228 points, down 278 points, a decrease of 1.29%.

This wave of decline continued the trend from earlier in the morning. According to data from Markets Insider at 03:50 Eastern Time, Dow futures had once fallen by 172 points, S&P 500 futures by 41 points, and Nasdaq 100 futures by 198.25 points, indicating that the market had already begun to reflect the impact of the credit rating downgrade during the Asian trading session.

Last Week's Rebound Pauses

Although the market sentiment turned more cautious before this week's opening, looking back at last week, U.S. stocks performed well. The S&P 500 index rose for five consecutive trading days, closing up 0.7% on Friday; the Dow Jones Industrial Average rose by 332 points; and the Nasdaq index rose by 0.5%. Overall, the Nasdaq index surged 7.2% for the week, while the S&P 500 and Dow rose by 5.3% and 3.4%, respectively, successfully recovering some of the losses since the beginning of the year.

However, Moody's downgrade action has dampened this rebound. Investors are concerned that if the U.S. debt issue is not effectively controlled, it may further affect government financing costs and market confidence in the future.

International Markets Under Pressure

The decline in U.S. stock futures is also related to the simultaneous adjustment in global markets. Major European stock indices generally fell, with the FTSE 100 index down 0.54% and the German DAX index down 0.19%. In the Asian market, the Nikkei 225 index fell 0.68%, and the Hong Kong Hang Seng index fell 0.46%.

Additionally, safe-haven assets, such as gold, experienced price increases. According to reports, the spot price of gold rose by 1%, reaching $3,235.70 per ounce, indicating that some market funds are shifting towards safe-haven assets.

Bond Market and Interest Rate Dynamics as Key Observations

The dynamics of the U.S. Treasury market have become the focus of market observation this week. If the 10-year Treasury bond yield continues to rise above 4.5%, it may exert further pressure on the stock market. According to Raymond James, this level is a watershed for the performance of large-cap stocks, and if breached, it may lead to a flow of funds out of the stock market and into the bond market or other assets.

Furthermore, the market will also focus on the economic data to be released this week, including the Manufacturing Purchasing Managers' Index (PMI), housing data, and retail earnings reports. Retail giants, including Target (TGT), Home Depot (HD), and Lowe's (LOW), are set to release their earnings reports, which the market will use to assess consumer spending and corporate profitability.

References

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