Moody’s Downgrade Sparks Market Sell-Off

On Monday, May 19, 2025, U.S. financial markets reacted sharply to Moody’s downgrade of the U.S. government’s credit rating from Aaa to Aa1. The credit agency cited persistent large fiscal deficits and a projected rise in national debt to 134% of GDP by 2035 as key factors behind the decision.

In response, major stock indexes opened lower:​

• The Dow Jones Industrial Average dropped over 250 points (0.6%).​

• The S&P 500 fell 1%.​

• The Nasdaq Composite slid by 1.4%.​

The downgrade also led to a rise in Treasury yields, with the 10-year note hitting 4.56%, indicating increased borrowing costs for the government.

Tech Giants Lead the Decline

Several major technology companies experienced significant stock price declines:​

• Apple Inc. ($AAPL): Shares fell by 2.7%, closing at $205.56.​

• Nvidia Corp. ($NVDA): The stock declined by 3.5%, reflecting investor concerns over the broader tech sector.​

• Tesla Inc. ($TSLA): Shares dropped over 4%, closing at $333.87, amid worries about the company’s exposure to rising interest rates and slowing electric vehicle demand.​

Retail and Consumer Stocks Under Pressure

Retailers also faced headwinds:​

• Walmart Inc. ($WMT): Shares declined by 2% after President Donald Trump criticized the retailer for potentially passing tariffs on Chinese goods to consumers, urging it to absorb the costs instead.

• Diageo plc ($DEO): The parent company of brands like Guinness and Johnnie Walker reported a $150 million annual impact from tariffs and plans to cut $500 million in costs over three years. ​

Commodities and Currency Movements

The financial turmoil extended to commodities and currencies:​

• Oil Prices: Declined to around $62.45 per barrel, reflecting concerns over global economic growth.

• Gold: Prices rose as investors sought safe-haven assets amid market uncertainty.​

• U.S. Dollar: The dollar weakened against major currencies following the credit downgrade.

Outlook: Navigating Uncertainty

The market’s reaction to Moody’s downgrade underscores investor anxiety over fiscal policy and economic growth prospects. As Treasury yields rise and stock prices fall, market participants are closely monitoring upcoming economic data and corporate earnings reports for signs of stability.​

Investors are advised to exercise caution and consider diversifying portfolios to mitigate risks associated with increased market volatility.​