Stocks fall to start the week after Moody’s cuts U.S. outlook
by Lisa Kailai Han and Hakyung Kim for CNBC
U.S. stocks dipped Monday after Moody’s Investors Service lowered its U.S. credit rating outlook to negative from stable.
The Dow Jones Industrial Average slipped 44 points, or 0.1%. The S&P 500 fell 0.4%, and the Nasdaq Composite pulled back by 0.6%.
Driving the losses in the S&P 500 were V.F., Illumina and Boston Properties, respectively down 3.4%, 4.2% and 3% just after the open. Shares of Boeing
added more than 4% after Emirates announced a $52 billion order for 95 aircraft.
Moody’s on Friday underscored the U.S.' “very large” fiscal deficits and partisan gridlock in Washington as contributing factors for the cut. The ratings agency reaffirmed America’s credit rating at AAA, the highest level. This comes three months after Fitch lowered the U.S. long-term foreign currency issuer default rating to AA+ from AAA, also citing expected fiscal deterioration, an increasing debt burden and political standoffs on fiscal and debt issues.
Treasury yields rose Monday following the outlook change. The benchmark 10-year yield gained 6 basis points to 4.686%.
“We’re seeing investor reaction to the Moody’s downgrade, but we’re also seeing skittishness around some big developments pending this week. We think all eyes are focused on this week’s inflation data and the resulting Fed policy,” said Greg Bassuk, CEO of AXS Investments.
With that in mind, Bassuk expects market volatility to continue through the end of the year, especially given the ongoing wars overseas. That, combined with mixed economic data, “have resulted in the Grinch fueling the Christmas rally this year.”
Investors are awaiting the release of fresh U.S. inflation data this week, with the latest reading on the consumer price index slated for release Tuesday.
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