U.S. Credit Rating Drop Causes Stock Market Decline
U.S> stocks dipped after Moody's downgraded the country's credit rating, wit the expectation that deficits will be much higher in 10 years.
Quick overview
- The U.S. stock market has lost momentum following Moody's downgrade of the country's credit rating from Aaa to Aa1.
- Early trading saw the Dow drop 0.6%, the S&P 500 fall 1.1%, and the Nasdaq decline by 1.5%.
- Treasury yields rose as stocks fell, and Moody's forecasts significant federal deficits by 2035.
- Despite the downgrade, tech stocks, particularly Nvidia, may present buying opportunities as the China-U.S. trade deal continues to positively impact the market.
The U.S. stock market has lost some of its upward momentum after Moody’s downgraded the country’s credit rating, dropping it from Aaa to Aa1.
As the U.S. credit rating experiences a downgrade, we expect that to impact the stocks market throughout the week, and Monday started off with a dip. During early morning trading, the Dow fell 0.6%, and the S&P 500 dropped 1.1%. The Nasdaq, too, fell, losing 1.5%.
Treasury yields rose at the same time, as they typically do when stocks fall. According to Moody’s forecast, by 2035, the federal deficits will amount to almost 10% of the U.S> economy. That would mean an increase of 6.4% from the last time they were calculated in 2024. Moody’s now makes it three major credit rating services that have downgraded the United States credit rating.
Stocks had climbed through last week on the back of the announced trade deal between China and the United States. That, coupled with the 90-day pause on many of the most severe tariffs, made the stock market far more investor friendly and caused some of the quickest upswings we had seen for the market all year long.
What to Expect from the Stock market Now
One of the stocks that investors should be paying close attention to is Nvidia, which is preparing to release new products that will make it more competitive in key markets, particularly in China, where strong competition is coming from tech company Huawei. The company’s stock is down 0.23% today, but this could be a good time for investors to buy the dip and profit considerably as the AI company rebounds.
We expect the tech stocks to do particularly well this year as AI continues to be a very profitable niche. The credit rating downgrade may only affect the stock markets minimally this week, and there should be strong upward movement as the China-U.S. trade deal continues to benefit the economy and ease the pressure of tariffs.
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