(Bloomberg) — US stocks declined and Treasury yields rose after Moody’s Ratings downgraded the US credit rating, citing an increase in government debt and a higher interest burden.
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An exchange-traded fund tracking the S&P 500 Index fell 1% in postmarket trading after the agency downgraded the nation’s score to Aa1 from Aaa. The Invesco QQQ Trust Series 1 ETF declined 1.3%, while Treasury futures closed at session lows. The Bloomberg Dollar Index paused trading at 4 p.m. in New York before the announcement by Moody’s.
The firm attributed the downgrade to an increase in government debt, a move that clouds the nation’s status as the world’s highest-quality sovereign borrower. The firm joined Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position.
The move adds to compounding risks facing the US market as President Donald Trump’s sporadic tariff regime weighs on the economic outlook. Although the S&P 500 has recovered from the depths of last month’s rout, many Wall Street professionals remain skeptical of the advance as the toll of tariffs on business and consumer confidence threaten to show up in economic data in months ahead.
Here’s how investors and market watchers are reacting to the news:
Eric Beiley, executive managing director of wealth management at Steward Partners:
“This is a warning sign. The US stock market is about to hit a ceiling after a much welcomed rally. A credit-rating downgrade by Moody’s may end up spurring some profit taking by money managers after a massive run for equities the past month.”
Ivan Feinseth, chief investment officer at Tigress Financial Partners:
“US Treasury bonds are viewed as the safest investments in the world. When America’s credit rating gets downgraded, the reverberations may potentially be more negative for other countries’ sovereign debt because the US is the benchmark. It remains to be seen how this will affect equity markets in the coming weeks, but there may be caution following the strong stock gains recently.”
Dave Mazza, chief executive officer of Roundhill Investments:
“While Moody’s finally made it official, markets have likely seen a diminished US credit profile coming for some time. Unlike the shock of S&P’s August 2011 downgrade, this downgrade lands in a market already wary of fiscal dysfunction and tariff risk — meaning the impact on stocks may be more muted than initial headlines suggest.”
