admin US stock markets opened significantly lower on Monday after Moody’s downgraded the country’s sovereign credit rating, citing rising federal debt and fiscal instability. The move spooked investors and led to widespread selling across key indices.
At the opening bell, the Dow Jones Industrial Average dropped 288.77 points (0.68%) to 42,365.97, the S&P 500 declined 56.68 points (0.95%) to 5,901.70, and the Nasdaq Composite led losses, falling 235.60 points (1.23%) to 18,975.50.
Moody’s downgrade was triggered by forecasts that the US federal deficit could rise to nearly 9% of GDP by 2035, compared to 6.4% in 2024. The increase is expected to come from higher interest payments, entitlement spending, and continued tax revenue shortfalls. The agency also highlighted the potential fiscal impact of extending Trump-era tax cuts, which could add $4 trillion to the deficit over the next decade.
Investor anxiety led to a jump in the CBOE Volatility Index (VIX), which rose 11.14% to 19.16. The yield on the 10-year US Treasury note climbed 10 basis points to 4.539%, reflecting a flight to safer assets.
Global Markets React; Oil Slips, Gold Rallies
Safe-haven demand pushed gold prices up by $49 (1.54%) to $3,236.20 per ounce. In contrast, US crude oil fell slightly by $0.07 to $62.42 per barrel. The euro gained against the dollar, with EUR/USD rising 0.833% to 1.126, while the dollar slipped against other major currencies.
Earlier futures trading pointed to market caution, with the S&P 500 down 1.1%, Dow futures off by 0.6%, and Nasdaq futures falling 1.5%.
In corporate news, Capital One completed its acquisition of Discover, with its shares down just over 1% in premarket trade. JPMorgan shares also dipped slightly ahead of an investor conference where CEO Jamie Dimon is expected to comment on global risks.
Overseas, European and Asian markets also declined. German, French, and UK indexes posted mild losses, while Chinese retail and industrial data missed expectations, dragging down regional indices. The Hang Seng and Shanghai Composite closed lower, and Alibaba dropped 3.4% on regulatory concerns. Oil benchmarks Brent and US crude each declined by 58 cents, reflecting continued market unease.
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