U.S. Treasury Yields Spike, Stocks Slide, Dollar Weakens After Moody's Downgrade

Barry Adams
19 May, 2025
New York City

Wall Street indexes turned lower after yields on the U.S. Treasuries advanced following a credit rating downgrade by Moody's Ratings. 

The S&P 500 index declined 0.7%, and the Nasdaq Composite dropped 1.1% in early trading amid rising bond yields. 

The yield on 10-year U.S. Treasury notes increased 6 basis points to 4.55%, and the 30-year Treasury notes advanced to 5.02% in Monday's trading. 

The yield on 10-year bonds jumped to the highest since mid-February, and 30-year bonds advanced to the highest since October 2023, following the belated downgrade by Moody's. 

Market sentiment was cautious, despite Moody's U.S. credit rating downgrade lagging by years the decisions by the other two major agencies.

The S&P Global removed the U.S. debt from its highest rating in 2011, and Fitch Ratings lowered its rating by one notch in 2023. 

The U.S. federal government debt has ballooned  to $36 trillion, and the debt is likely to jump by another $3.5 trillion if the Republican Party-controlled Congress passes the current budget proposal. 

The U.S. federal government debt has been on a tear, regardless of which party gains control of the White House or the U.S. Congress, and the federal debt is estimated to jump to 135% of the U.S. GDP in 2035. 

"Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government's debt and interest burden higher," Moody's Ratings added in its note. 

The agency estimated federal debt to increase to around 134% of GDP and 9% of GDP by 2035, up from 98% and 6.4% in 2024, respectively.  

The U.S. economy is already under pressure from Trump tariffs, and most households are struggling to make ends meet after housing, food, and transportation costs continue to advance. 

 

Commodities, Currencies, Indexes, Yields

The S&P 500 index decreased 0.6% to 5,925.06, the Nasdaq Composite edged down 0.7% to 19,069.68, and the Russell 2000 index declined 1.4% to 2,082.93.

The yield on 2-year Treasury notes edged higher to 4.03%, 10-year Treasury notes increased to 4.55%, and 30-year Treasury bonds advanced to 5.04%.

WTI crude oil decreased $0.07 to $62.42 a barrel, and natural gas prices edged lower by $0.16 to $3.17 a thermal unit.

Gold increased by $27.21 to 3,231.58 an ounce, and silver edged up by $0.07 to $32.35.

The dollar index, which weighs the US currency against a basket of foreign currencies, decreased by 0.80 to 100.29 and traded at a two-year high.

 

U.S. Stock Movers 

Banks led the decliners on Wall Street after the yield on 30-year U.S. Treasury bonds crossed 5%.  

JPMorgan Chase & Company declined 0.7% to $265.70, Wells Fargo dropped 0.9% to $75.48, Citigroup decreased 1.3% to $74.76, and Bank of America eased 1.4% to $44.08. 

In Monday's trading, retailers lacked direction amid growing worries that consumers may retrench from spending amid rising cost of living and high levels of economic uncertainty rooted in Trump tariffs.

Walmart Inc. dropped 1.7% to $96.53, Target Corp. decreased 1.5% to $97.10, Home Depot fell 1% to $377.0, Macy's declined 1.3% to $12.08, and Amazon.com Inc. traded down 2% to $201.39.