Wall Street futures slide up to 1.6% after Moody’s US downgrade, bond yields surge past key levels

US stock futures slide up to 1.6% after Moody’s downgrade, bond yields surge past key levels

Following a solid last week, US stock futures dropped sharply on Monday, as investors reacted to Moody’s decision to downgrade the country's credit rating, reigniting concerns about rising debt and higher borrowing costs.

At last count, futures linked to the Dow Jones Industrial Average were down 349 points, or 0.8 percent. S&P 500 futures slipped 1.2 percent, while the tech-heavy Nasdaq-100 futures tumbled 1.6 percent, reflecting the risk-off sentiment across markets.

Moody’s lowered the US government’s long-term credit rating by one notch to Aa1 from Aaa, stripping it of its last perfect score among the major credit agencies. The downgrade, announced late Friday, was attributed to ballooning fiscal deficits and the strain of refinancing existing debt amid elevated interest rates.

The move had hit bond markets hard. The yield on the 30-year Treasury climbed above the psychological 5 percent mark, rising more than 12 basis points to 5.023 percent. Other maturities saw similar pressure, with the 10-year yield rising to 4.546 percent and the 2-year trading just above 4 percent.

The downgrade came on the heels of a robust week for Wall Street. Investors had piled into equities after the US and China reached a tentative agreement to temporarily ease trade tensions. The Nasdaq Composite surged over 7 percent last week, notching its best performance in months, while the S&P 500 added more than 5 percent over five straight sessions of gains. The Dow also advanced more than 3 percent, with a 300-point rally on Friday pushing it into the green for 2025.

But those gains looked fragile as the new week began, with the credit rating action casting a long shadow. Market watchers now await a flurry of commentary from Federal Reserve officials on Monday, including Atlanta Fed President Raphael Bostic, New York Fed’s John Williams, and Dallas Fed’s Lorie Logan. Their remarks could offer clues on how monetary policymakers interpret the fiscal outlook and its implications for interest rates.