Stan Choe, AP Business Writer
NEW YORK (AP) – U.S. stocks are drifting down lower, but the value of U.S. bonds and dollars have fallen sharply Monday following the latest reminder that appears to be surged towards an unsustainable mountain of debt.
The S&P 500 was 0.4% lower in morning trading after Moody’s ratings became the last of three major credit rating agencies. The Dow Jones industrial average was 38 points (down 0.1%) as of 10:05am Eastern time, while Nasdaq’s composites were 0.6% lower.
Moody’s pointed out how the US government borrows more and more money to pay for it. Political quarrels have made it difficult to curb Washington’s spending or raise its revenues, putting balloon debt under more control.
That’s a blow because downgrades essentially means globally investors shouldn’t lend money to Washington at such low interest rates. The 2010 Treasury yield rose to 4.52% from 4.43% on Friday. That number shows how much investors are asking the US government to lend money for 10 years.
Perhaps even more upset, Treasury yields for 30 years bouncing above 5% before rising from under 4% in September. The Short-Term Treasury has moved much less, moving more towards expectations about what the Federal Reserve will do with overnight interest rates than what investors feel about the US government and the economy.
And if Washington has to pay more interest to borrow cash to pay the bill, it could raise interest rates for US households and businesses on everything from mortgage fees to car loan fees to credit cards. It could in turn slow the economy.
Of course, nothing Moody’s said to be new. Critics have opposed Washington’s incompetence, which has not been able to control its debt for many years. Standard & Poor’s downgraded the US government in 2011.
This means that investors are likely already explaining most of the well-known issues, according to Brian Rehling, another analyst at the Wells Fargo Investment Institute, head of global bond strategy. They expect “limited impact on additional markets” following the initial response.
However, downgrades are coming before a critical period for Washington. Washington is supposed to discuss potential tax cuts that could smoke more income.
Downgrades will add to the long list of concerns that are already heavier in the market. The chiefs among them have already forced them to question whether the US bond market and the US dollar deserve their reputation as some of the safest places to park cash in the midst of a crisis, which is already forced to question the global US bond market and the US dollar.
Despite tariff pressures, the US economy appears to have remained OK so far, but large companies have recently warned that they are uncertain about the future. Walmart, for example, says the prices need to be raised due to customs duties. It caused Trump to criticize and demand Walmart over the weekend, causing China to “eat tariffs.”
Walmart stocks fell 1% on Monday.
Other major retailers are on a schedule to report the latest quarterly results this week, including Target, Home Depot, Lowes, and TJX Cos.
In overseas stock markets, the index was pretty low across Europe and Asia.
Stocks were closer to flat in both Shanghai and Hong Kong after Beijing said retail sales in April were lower than expected. The increase in industrial production slowed from 7.7% in March to 6.1% year-on-year.
In the foreign currency market, the value of the US dollar has declined against everything, from the euro to the Australian dollar.
AP writers Jiang Junzhe and Matt Ott contributed.
Original issue: May 19, 2025 7:23am EDT
