U.S. stocks sank early Monday, with the S&P 500 dropping 1% at the open, the Nasdaq sliding 1.3%, and the Dow Jones Industrial Average down 297 points, or about 0.6%. The VIX spiked 13% and gold pushed higher, too.
The declines followed fresh saber-rattling from the White House over Walmart’s (WMT) tariff-related price hikes and a consequential downgrade from Moody’s — the last major ratings agency to strip the U.S. of its AAA status.
What’s behind the downgrade
Moody’s decision on Friday to strip the U.S. of its last remaining triple-A credit rating marks the end of an era —symbolically, anyway. While markets had long priced in the risks of growing deficits and political dysfunction, the move formalizes what investors already suspected: U.S. debt is no longer risk-free in name, let alone in fact. Moody’s joins S&P and Fitch, both of which downgraded the U.S. years earlier. (While Moody’s released reasoning behind the decision, the agency does not allow extensive summary of its materials, which is why it isn’t quoted here.)
But the timing of the downgrade still matters, helping to explain Monday morning’s steep climb in Treasury yields, with the 30-year yield pushing back above 5%. Such spikes in yields can have a gravity-like effect on markets by raising borrowing costs across the economy, which can drag on equity valuations — particularly for growth stocks with steep multiples, hence the harsher drop in the Nasdaq vs. other major indexes.
Historically, sudden surges in yields have triggered “rotation” out of stocks, tightening credit standards, and in some cases, preceding recessions. Unlike in 2011, when the S&P downgrade paradoxically sparked a rally in Treasuries, this time there’s little sense of a safe haven anywhere.
The danger is that higher rates begin to work their way more aggressively through earnings and balance sheets. As companies roll over debt at higher borrowing costs and households similarly face pricier credit, the economy cloud, paradoxically, slow at an accelerated pace.
The Moody’s call may be belated — a trailing indicator, as analysts say. But it’s also a reminder that conditions are deteriorating in plain sight.
Jefferies says Moody’s move will fuel capital flight from U.S.
In a memo released early Monday, the investment bank Jefferies (JEF) noted: “The tariff war has already led a number of investors to question the credibility of investing in the US and to seek alternatives. A rating downgrade will add to the argument of outflows away from the US and into Europe and Asia.”
The memo went on: “In our conversations with a number of real money accounts, there has been a clear sense of moving away from the US, though most accounts have not pulled the trigger yet.”
White House attacks Walmart over tariffs
U.S. Treasury Secretary Bessent said Sunday that he had a call with the CEO of Walmart in which Walmart agreed to absorb some tariff costs. However, numerous news outlets report the call was arranged weeks prior and the company’s position has not changed.
President Donald Trump also claimed over the weekend that Walmart made “BILLIONS OF DOLLARS” more than expected last year — a figure that does not stand up to scrutiny. In reality, Walmart’s growth over the last several years has been steady but far from explosive, with earnings tracking close to Wall Street expectations.
It’s simple: Companies Walmart’s size, age, and in the sort of ultra-low-margin business Walmart is in, just do not see surprise billions. The company is mature. Its profits represent only teeny-tiny slices of sales prices. What’s more, Walmart’s forecasts are incredibly closely followed and tracked, another reason the chain doesn’t tend to bowl analysts over with stunning wins and unforeseen upside.
For instance, Walmart’s solid Q1 2025 performance reflected very modestly rising sales, digital growth, and some grocery market-share gains, not any wild windfall. The exaggeration appears aimed at deflecting blame for inflationary pressure in fact triggered by Trump’s own tariffs.
Walmart stock fell about 1.5% at the open.
Congrats, you own crypto now – like it or not
Coinbase (COIN) joins the S&P 500 on Monday, marking a milestone not just for the company but for crypto itself. By entering the index, which is tracked by trillions in ETFs, index and mutual funds, the crypto exchange becomes part of virtually every American’s portfolio, whether they like it or not. It’s an interesting twist for an industry long seen as an alternative to the financial system. Now crypto is quite literally embedded in it, and arguably about as mainstream as it’s possible to get.
Coinbase stock fell about 1.9% at the open, after soaring earlier on the news of its coming S&P 500 inclusion.