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S&P500, Nasdaq Composite down as Moody's downgrade dents sentiment; bond yields rise

Moody’s cut the country’s long-term issuer rating by one notch to Aa1, bringing it in line with S&P and Fitch.

May 19, 2025 / 21:49 IST
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The downgrade followed a strong week for equities. Stocks had surged after a temporary trade agreement between the U.S. and China eased fears of an all-out tariff war.

U.S. stocks stumbled on Monday after Moody’s Investors Service downgraded the country’s credit rating, a move that sent bond yields climbing and rekindled investor caution.

The Dow Jones Industrial Average slipped 17 points, staying mostly flat, while the S&P 500 fell 0.3 percent and the Nasdaq Composite dropped 0.5 percent, with rate-sensitive tech shares bearing the brunt of the selling.

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The downgrade—Moody’s trimmed the U.S. sovereign rating from Aaa to Aa1—brings it in line with other rating agencies and adds to the growing concerns around Washington’s mounting fiscal deficits. The firm pointed to persistent budget shortfalls and the challenges of refinancing debt in a high-interest rate environment as key reasons behind the decision.