US Stock Futures Slide on Moody’s Downgrade of US Credit Rating

US stock futures declined sharply Sunday evening after Moody’s Investors Service downgraded the United States’ long-term credit rating from Aaa to Aa1. This move aligns Moody’s with Fitch Ratings and S&P Global, which had previously lowered the US credit rating from the top-tier level. Moody’s cited rising budget deficits and the growing cost of refinancing government debt amid persistent high interest rates as primary reasons behind the downgrade.

The downgrade immediately triggered a bearish sentiment in futures trading, reversing the bullish momentum that had lifted US equities over the prior week. Dow Jones Industrial Average futures dropped approximately 250 points, or 0.6%, while contracts linked to the S&P 500 and Nasdaq 100 fell 0.8% and 1.1%, respectively. These declines reflect investor concerns over the country’s fiscal health and the broader implications for economic stability.

Highlights:

• Moody’s cut US credit rating from Aaa to Aa1 due to escalating deficits and refinancing costs.

• Dow futures declined around 250 points, S&P 500 and Nasdaq futures down 0.8% and 1.1%.

• The downgrade aligns Moody’s rating with Fitch and S&P, which had earlier downgraded US credit.

Wall Street’s Prior Rally and the Impact of Tariff Developments

Last week, US equities enjoyed a strong rally fueled by optimism surrounding a temporary truce in the ongoing US-China tariff conflict. The Nasdaq surged more than 7% during the five-day rally, with the S&P 500 gaining over 5% and the Dow Jones Industrial Average climbing more than 3%. This bullish streak was largely driven by hopes that easing trade tensions would support corporate earnings and economic growth.

However, the mood soured on Sunday with Moody’s downgrade and renewed tariff rhetoric from President Donald Trump. The president criticized Walmart on social media, urging the retail giant to “eat the tariffs,” signaling continued friction between the administration and major corporations affected by the tariff regime. This latest salvo follows a recent spat with Amazon, highlighting ongoing tensions over the economic impact of tariffs on consumer prices and business operations.

Highlights:

• Nasdaq surged 7%, S&P 500 up 5%, Dow rose 3% in previous five-day rally.

• President Trump criticized Walmart on tariffs, signaling continued trade tensions.

• Tariff rhetoric adds pressure on markets amid Moody’s credit rating downgrade.

Market Outlook and Upcoming Economic and Corporate Developments

Looking ahead, the market calendar for the week is relatively light in terms of major economic data releases. Investors will be closely watching manufacturing sector reports and initial jobless claims for clues on economic momentum. Additionally, the market remains attentive to developments in the Republican tax-and-spend bill, which encountered significant internal opposition late last week, creating uncertainty about fiscal policy direction.

On the corporate earnings front, with many large companies having already reported their quarterly results, focus will shift to key retail and technology names. Target, Home Depot, and Workday are among the notable companies scheduled to release earnings reports this week. Their performance will be closely monitored as indicators of consumer spending trends and the health of the tech sector amid the evolving macroeconomic backdrop.

Highlights:

• Market awaits manufacturing data and initial jobless claims for economic signals.

• Republican tax-and-spend bill faces internal party obstacles.

• Key earnings reports due from Target, Home Depot, and Workday this week.