after Moody's downgrades country's credit rating- U.S. stock futures fell sharply early Monday after credit rating agency Moody’s downgraded the U.S. sovereign credit rating by one notch, citing growing concerns over the nation’s $36 trillion debt. This move, though expected by some market watchers, still managed to shake investor confidence at the start of the trading week. Treasury yields climbed, and tech stocks took a hit as Wall Street reacted to the news. Moody’s cut the rating from “Aaa” to “Aa1”, marking the first time since 1919 that the U.S. has held anything less than a perfect rating from the agency. The downgrade brings Moody’s in line with other major credit rating firms, which had already made similar moves in past years.

Moody’s decision came late Friday, pointing to fiscal concerns, particularly around the United States’ growing national debt and ongoing political gridlock over spending.

“The ratings agency has been watching closely since November 2023,” according to Deutsche Bank analysts, who noted that such downgrades usually follow a 12-18 month window after a rating is placed under review.

This means the move wasn’t exactly a surprise for market insiders, but the timing—right as new tax cut proposals heat up debate in Congress—adds to the financial uncertainty.

As of 4:18 a.m. ET on Monday, the early signs were clear: U.S. stock futures were deep in the red. Here’s a look at the numbers: Meanwhile, yields on U.S. government bonds, which move inversely to prices, ticked higher. The 10-year Treasury yield was last seen at 4.51%. Some of the biggest names in tech and growth stocks saw significant losses in premarket trading: This dip comes after a strong week for stocks, where the S&P 500 logged five straight days of gains, thanks in part to easing tensions in the U.S.-China trade talks and softer-than-expected inflation data. The downgrade is yet another sign that global investors are growing wary of the United States' long-term fiscal outlook. With the federal deficit ballooning and political deadlock slowing progress on financial reforms, markets are now being forced to price in greater risk for what was once considered the safest credit in the world.

One major concern is the reemergence of Trump’s tax cut bill, which cleared a key congressional committee on Sunday after several days of Republican infighting over spending plans. If passed, this could further add to the deficit and debt concerns already highlighted by Moody’s.

In addition to digesting the Moody’s downgrade, markets are also gearing up for a series of Fed speeches today. At least five Federal Reserve officials, including New York Fed President John Williams, are scheduled to speak.

Investors will also keep an eye on the last leg of the earnings season, with over 90% of S&P 500 companies having already reported. Big names like Home Depot and Target are set to report later this week.

The Moody’s U.S. credit rating downgrade has set a more cautious tone for investors heading into the week. It reflects not just the rising national debt, but also a broader concern over U.S. fiscal management and political polarization.

As global markets react, investors will likely focus on Treasury yields, Fed commentary, and upcoming earnings results to assess what’s next. The downgrade may not have come as a surprise, but it definitely reminded everyone that America’s economic foundation isn’t immune to long-term risks.

Moody’s lowered the rating due to rising debt and political issues over spending control.

Q2: How did US stock futures react to the downgrade?
US stock futures dropped sharply, while Treasury yields went up and tech stocks fell.