S&P 500, Nasdaq futures drop over 1.3% ahead of Wall St. open after Moody’s US credit ratings cut, Dow down 0.9%

United States benchmark indices such as the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average dropped ahead of the Wall Street open on Monday, 19 May 2025, after ratings agency Moody’s downgraded the US sovereign debt ratings on Saturday.

S&P 500 futures contracts dropped 1.3 per cent, as investors cooled off from the equity demand, which has been raging on optimism since the US-China tariff war de-escalation deal last week, reported the news agency Bloomberg.

Other US benchmark indices like the Nasdaq futures also dropped 1.7 per cent, while the Dow futures were also trading 0.9 per cent lower ahead of the US market open. 

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Global Markets

On the global indices front, all of the Asian indices, including Hang Seng, Nikkei 225, Asia Dow, and BSE Sensex, closed lower, apart from the Shanghai Composite Index, which closed flat at 3,367.58 points.

While European benchmark indices like the FTSE 100, DAX, Stoxx 600, and CAC 40 were trading lower on Monday’s market session, the MSCI World Index was up 0.1 per cent on 19 May 2025. 

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Moody’s rating downgrade

Moody’s on Saturday, 16 May 2025, joined Fitch Ratings and S&P Global’s cue, downgrading the US sovereign credit rating over rising concerns of America’s $36 trillion debt burden.

Even though Moody’s upgraded to a “Stable” outlook compared to the “Negative” levels before for the US economy, the American ratings agency downgraded the US government’s credit ratings by one notch to “Aa1” from “Aaa” levels, according to Mint’s earlier report.

“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” said Moody’s after its first downgrade since 1919.

The ratings agency also expects that the United States will add $4 trillion to the federal primary deficit in the next ten years due to the entitlement spending increases and the flat revenue growth in the economy. 

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US Treasury Yields

According to the news agency’s report, the 10-year US Govt Treasuries advanced seven basis points to 4.54 per cent on Monday, and the 30-year equivalents rose nearly five basis points to 2.64 per cent.

“The current level of yields on US Treasuries doesn’t feel out of touch with economic fundamentals,” said Stephane Deo, senior portfolio manager at Eleva Capital, told the news agency. As for equities, “it feels very normal to me that the market needs a breather and the Moody’s downgrade is good excuse for doing just that.”

The German 10-year treasury yield also rose five basis points to 2.64 per cent, along with the British 10-year treasury yield, which advanced seven basis points to 4.72 per cent, according to the news agency’s report.

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Global Currencies

The Euro rose nearly 1.1 per cent on Monday, leading the gains against the US dollar among the major global currencies. 

“Expect a risk premium to stay in the dollar this week, with investors also on the lookout for any currency references in trade deals currently being negotiated with Asia,” said Chris Turner, head of currency strategy at ING told the news agency. 

According to Bloomberg US Dollar Spot Index was down 0.85 per cent, trading at 100.234 as of 8:30 a.m. (EDT) on 19 May, 2025. 

“The US needs to keep the dollar at an attractive level if it wants the world to continue to finance its deficits,” Pierre-Alexis Dumont, chief investment officer at Sycomore Asset Management in Paris, told the news agency. 

The Japanese Yen rose 0.6 per cent to 144.78 per dollar, while the British pound was up 0.9 per cent to $1.3398, as per the report. 

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary. 

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