US Stocks Drop After Moody’s US Rating – Europe Market Wrap

US bonds, stocks and the dollar dropped after Moody’s Ratings stripped the government of its top credit rating, reinforcing concern about the status of American assets. Gold rose.

S&P 500 contracts fell 1.3%, with investors cooling on equities after a five-day winning streak. European and Asian shares also dropped. The yield for 30-year Treasuries surpassed 5%, rising to the highest level since November 2023. The euro rose as much as 1.1%, leading gains against the greenback among major currencies.

The downgrade risks reinforcing Wall Street’s growing worries over the US sovereign bond market as a ballooning budget deficit shows little signs of narrowing. The rating cut comes as lawmakers debates even more unfunded tax cuts and the economy looks set to slow as Trump upends long-established partnerships and restructures trade deals.

Moody’s joined Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top triple-A position. The credit assessor now has a stable outlook. While Moody’s recognized the US’ significant economic and financial strengths, it no longer fully counterbalances the decline in fiscal metrics, the ratings company said.

On Monday, 10-year Treasury yields advanced seven basis points to 4.54% and their 30-year equivalents rose about eight basis points to 5.02%. Meanwhile, gold rose 1.1%, with appetite for the haven asset boosted by concerns about the US economic outlook.