Stocks, bonds, and the U.S. dollar all dropped Monday morning after Moody’s downgraded the U.S. credit rating — a major red flag over America’s growing debt crisis.
The S&P 500 slid 0.9% early in the day. The Dow fell 222 points, or 0.5%, and the tech-heavy Nasdaq took the biggest hit, falling 1.3%.
Moody’s became the last of the big three credit-rating agencies to pull the U.S. off its top-tier “Aaa” rating. The reason? The U.S. government keeps piling on debt, and constant political fights in Washington are making it nearly impossible to cut spending or raise taxes to deal with it.
Moody’s warned that the “U.S. government’s fiscal strength has weakened,” and that there’s no plan in sight to fix it.
This downgrade means global investors no longer see U.S. debt as rock-solid — and they want more interest to lend America money. The yield on the 10-year Treasury shot up to 4.53% from 4.43%. Even more alarming, the 30-year Treasury yield jumped back above 5% — a level it hadn’t touched since September.
That’s bad news for everyone. If it costs Washington more to borrow, interest rates for regular people — on mortgages, car loans, and credit cards — will likely rise too. That could slow the economy.
“This isn’t new,” said Brian Rehling of Wells Fargo. “We expect limited additional market impact.” In other words, most investors have seen this coming.
But the timing of the downgrade couldn’t be worse. Lawmakers are about to debate possible tax cuts, even as debt piles up and the government nears its borrowing limit again.
The downgrade adds to growing fears already weighing on markets, including the trade war launched by former President Trump. That fight has made investors rethink whether the U.S. dollar and U.S. bonds are still the safest places to put their money.
Companies are also starting to sound the alarm. Walmart recently warned it will have to raise prices due to tariffs. Trump hit back over the weekend, demanding that Walmart and China “eat the tariffs.”
Walmart stock dropped 1.8%.
Other major retailers like Target, Home Depot, Lowe’s, and TJX are set to report earnings this week. Analysts are watching closely to see how deeply tariffs and the broader economic slowdown are cutting into profits.
Overseas, markets were also in the red. Stocks in Europe and Asia mostly fell.
In China, retail sales came in weaker than expected, and factory output also slowed — signs that the economy there may be losing steam. “After an improvement in March, China’s economy looks to have slowed again last month,” said Julian Evans-Pritchard of Capital Economics. “Firms and households [are] turning more cautious due to the trade war.”
