Stock futures fall after Moody's downgrades U.S. credit rating

Stock futures declined before the opening bell Monday after the U.S. credit rating was downgraded by Moody's Ratings on Friday.

As of 8:30 a.m. EST, S&P 500 futures had shed 65 points, or 1.1%, while Dow Jones Industrial Average futures declined 252 points or 0.6%. The tech-heavy Nasdaq Composite futures dropped 1.5%. The U.S. dollar also weakened, while Treasury yields rose.

News of a 90-day pause in high tariff rates between the U.S. and China bolstered investor confidence last week, leading to a rally on Wall Street. But Moody's announcement of a credit downgrade late Friday threatened take some wind out of investors' sails.

In cutting its U.S. credit rating from Aaa to Aa1, Moody's forecast that federal deficits will widen to almost 9% of the U.S. economy by 2035, up from 6.4% in 2024, driven mostly by higher interest payments on debt, growing entitlement spending and low revenue generation from taxes. Moody's was the last of the three major credit rating agencies to downgrade the nation's government debt.

Moody's decision was "hardly surprising," said Adam Crisafulli, equities analyst and head of Vital Knowledge, in a research note.

"But it did serve to remind markets, which had become quite complacent and expensive in the last few weeks, that there is a serious fiscal problem that needs to be reckoned with (in addition to the existing tariff problem)," he added.

In addition to reflecting tariff concerns, Moody's downgrade also highlighted apprehension that the reconciliation bill in Congress, dubbed the "big, beautiful bill" by President Trump, could further fuel U.S. debt, said Oxford Economics analyst John Canavan in a research note. The bill is likely to increase the statutory debt limit by $4 trillion, according to the Bipartisan Policy Center.

Concerns over debt come as consumer confidence continues to slip. The University of Michigan's consumer sentiment index released last week showed consumer confidence dipped again in May as Americans fret over the trade war's impact on inflation.

In:
• Dow Jones
• Debt Ceiling
• S&P 500
• Nasdaq

The Associated Press contributed to this report.