U.S. stocks end higher as investors digest Moody's U.S. credit downgrade
U.S. stocks ended higher on Monday, reversing earlier...
U.S. stocks ended higher on Monday, reversing earlier losses, as investors digested Moody’s decision to downgrade the U.S.’s credit rating from triple-A.
According to Dow Jones Market Data, the Dow Jones Industrial Average was up 137.33 points, or 0.3%, to end at 42792.07 after falling 317 points at its session low.
The S&P 500 increased 5.22 points or less than 0.1% to close at 5963.60.
The Nasdaq Composite added 4.36 points or less than 0.1% to finish at 19,215.46
VIX jumps after Moody’s downgrades U.S. credit rating
The stock market’s "fear gauge" jumped Monday after...
The stock market’s "fear gauge" jumped Monday after Moody’s downgraded the U.S. government’s credit rating.
The CBOE Volatility Index, which trades under the ticker symbol VIX, was up 13% on Monday morning at around 19.50, according to FactSet data, at last check. That’s around the gauge’s long-run average.
“While the Moody’s downgrade may cause a bit of near-term equity market volatility, history shows it does not portend structurally higher interest rates, an imminent recession, or declining stock prices,” Nicholas Colas, co-founder of DataTrek Research, said in a note emailed Monday.
“Rating agencies play a critical role in capital markets, but their decisions about US sovereign debt have never signaled anything useful about future asset prices,” he said.
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After the stock market closed on Friday, credit rating agency Moody’s...
After the stock market closed on Friday, credit rating agency Moody’s got in a mood, downgrading America’s creditworthiness from a perfect AAA grade to the next-best Aa1 on account of running up massive deficits and paying an eye-watering amount of interest to service its debt.
There are three major credit agencies, and Moody’s was the last to knock the US from the most pristine credit rating. The others, S&P and Fitch, downgraded US’ credit in 2011 and 2023, respectively. Moody’s hadn’t lowered the US’ stellar score since it issued it in 1919.
Bloomberg Opinion noted that the US government paid over $1.1 trillion in interest on its debt last year, more than the Pentagon’s entire budget.
Moody’s is concerned that the US won’t generate enough tax revenue to cover interest on its debt, meaning it would have to borrow money just to pay interest on…the money it already borrowed.
