Stocks retreat to start week as yields spike on U.S. debt downgrade: Live updates

Stocks slipped on Monday after Moody’s downgraded the U.S. credit rating late Friday, causing Treasury yields to spike.

The Dow Jones Industrial Average traded 17 points lower, or less than 0.1%. The S&P 500 dipped 0.3%, while the Nasdaq Composite shed 0.5%.

Moody’s lowered the U.S. credit rating down one notch to Aa1 from Aaa, bringing the agency in line with peers. The firm cited financing challenges tied to the federal government’s growing budget deficit and the ramifications of rolling over existing U.S. debts in a period of high borrowing costs.

The debt downgrade pressured bond prices, sending yields higher, at a time when the economy is already awaiting the full impact of President Donald Trump’s unfolding tariff policy. The 30-year U.S. bond yield traded above 5% on Monday and the 10-year yield topped 4.5%, levels that hurt equity markets last month and helped lead Trump to back off his stiffest tariff measures. Rates on mortgages, car loans and credit cards track the 10-year yield.

Equities pared their early losses as Treasury yields retreated from their highest levels of the session.

Leading the losses Monday were key tech stocks that would be hurt the most if rising yields slowed the economy and hurt investors’ risk appetites. Palantir was off by 2%, Tesla shed 3% and Apple was off by 2%.

Although equities had retreated pretty severely in Monday’s premarket session — with Dow futures down more than 300 points — they clawed back a large portion of their losses by midmorning.

“The Moody’s report didn’t highlight anything that every investor doesn’t already know about the U.S. fiscal situation,” said Ross Mayfield, investment analyst at Baird. “To me, it just kind of provided a little bit of cover for the market to take a breather here, but nothing that structurally changes our bullishness on where we think we’ll be in the next six to 12 months.”

The downgrade comes after a winning week on Wall Street as investors cheered the White House’s deal with China to temporarily slash levies. The agreement was seen as a breakthrough for global trade after Trump’s initial plan for broad and steep import taxes was unveiled last month.

The technology-heavy Nasdaq Composite led the way last week, surging more than 7%. The broad S&P 500 jumped over 5% and posted a five-day winning streak. The blue-chip Dow rallied more than 3% last week. Friday’s gain of over 300 points pushed the 30-stock average into positive territory for 2025.

Traders now see more trade deals as key to keeping the stock market comeback going, if higher yields don’t scare away investors first.