U.S. stocks stumbled on Monday while Treasury yields climbed, as investors digested a credit rating downgrade from Moody’s alongside fresh uncertainty stemming from President Donald Trump’s tariff threats.
The downgrade triggered renewed concerns over the country’s fiscal stability, rattling Wall Street just as it was regaining momentum. The S&P 500, which had been nearing bull market territory after a strong rebound since April, dropped 1% on the day.
Big tech stocks — the main drivers of the recent rally — bore the brunt of the decline. Tesla and Nvidia each fell more than 1.5%, dragging the broader market lower. Retail giant Walmart also dipped after Trump criticized the company for citing tariffs as a factor in its price hikes, telling the retailer to stop using them as an excuse.
With bond markets also reacting to the downgrade, investors were left navigating a volatile mix of fiscal anxieties and trade policy uncertainty. Long-dated U.S. Treasuries, already on the rise before Moody’s announcement, surged past 5% as investor worries deepened over the country’s swelling debt load. The U.S. deficit has exceeded 6% of GDP for two consecutive years — a historically high level outside of major recessions or global conflicts. Meanwhile, the dollar weakened against most major currencies, while gold gained as investors sought safer assets.