Wall Street Shrugs Off Moody’s Downgrade

One of the biggest pieces of news last week was the decision by Moody’s to downgrade the credit rating of the US. Keep reading to find out more about the market reaction and other news.

Moody’s Downgrades US

On Friday, Moody's stripped the US of its triple-A credit rating, citing growing government debt and a widening budget deficit. A lower credit rating signifies countries are more likely to default on their sovereign debt and typically leads to higher borrowing costs.

Moody’s was the last of the big three rating agencies to maintain the highest rating possible on US sovereign debt. Its decision followed previous moves by Standard and Poor’s and Fitch, who both downgraded the US in 2011 and 2023 respectively.

Despite starting the session lower, US stocks appeared to shrug off the news on Monday, erasing their intraday losses and closing the session relatively flat. The Nasdaq, S&P 500 and Dow Jones all ended the day with gains of 0.02%, 0.09% and 0.32%.

Monday marked a sixth consecutive session of gains for the S&P 500 which, despite the volatility of the last few weeks, currently sits just 3% off its all-time high.

Following Moody’s decision, 30-Year Treasury yields spiked to their highest level since October 2023 during Monday’s session. However, throughout the day they retreated significantly from these levels. Bond yields move inversely to price, so rising yields indicate selling pressure.

Consumer Sentiment Slides Lower

The University of Michigan Index of Consumer Sentiment edged down in May, as the index fell to its lowest level in three years.

The preliminary reading, released on Friday, showed that US consumer sentiment had declined for the fifth consecutive month, with the index falling to 50.8, its lowest reading since July 2022.

The survey revealed that US consumers are concerned that US trade policy will lead to higher inflation, with three quarters of respondents specifically mentioning tariffs. However, it’s worth noting that the survey was conducted before the US and China announced a 90-day pause on a range of tariffs between each other.

This latest data regarding consumer sentiment followed news earlier last week that US annual inflation had unexpectedly cooled to 2.3% in April.

UK GDP Grows More than Expected

On Thursday, the Office of National Statistics (ONS) announced that the UK economy is estimated to have grown by 0.7% in the first quarter. 

Not only was this figure significantly higher than the 0.1% recorded the previous quarter, but it was also higher than had been anticipated by economists. 

First quarter growth was powered by the services sector and an increase in investment. Net trade also had a positive impact, with export volumes increasing 3.5%, suggesting that activity may have been brought forward in an attempt to avoid tariffs. 

This week, on Wednesday, the ONS will release UK inflation data for April, in which headline inflation is expected to have accelerated. 

Practise Trading on a Risk-Free Demo Account

Are you interested in practising trading without risking your funds? A demo trading account from Admiral Markets allows you to do just that, whilst trading in realistic market conditions. Click the banner below to open a demo account:

INFORMATION ABOUT ANALYTICAL MATERIALS: 

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets' investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”). Before making any investment decisions please pay close attention to the following:           

• This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.          
• Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.          
• With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.          
• The Analysis is prepared by an analyst (hereinafter “Author”). The Author, Roberto Rivero, is a contractor for Admiral Markets. This content is a marketing communication and does not constitute independent financial research."          
• Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.          
• Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.          
• Leveraged products, including Contracts for Difference (CFDs) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.