Following Moody’s downgrade of the U.S. sovereign credit rating from Aaa to Aa1 on May 16, 2025, major U.S. banks including Bank of America and JPMorgan Chase faced further rating cuts on Monday, reflecting growing concerns over the nation’s escalating $36 trillion debt burden and fiscal outlook.
Despite initial market jitters and lower openings, U.S. equities rebounded by the close on Monday. The Dow Jones Industrial Average (DJIA) rose 137 points (0.3%) to 42,792, supported by strong gains in insurance giant UnitedHealth, which surged 8% and was the top performer among the 30 DJIA components. The S&P 500 advanced 5 points to 5,963, marking its sixth consecutive day of gains, while the Nasdaq remained steady, closing 4 points higher at 19,215.
Bank stocks underperformed amid the downgrade fallout, with Goldman Sachs falling 1.1% and JPMorgan declining over 1%, reflecting investor caution in the financial sector.
The downgrade by Moody’s—the last major agency to lower the U.S. rating—cited sustained increases in federal debt and interest payments, highlighting a failure by successive administrations and Congress to address rising deficits and fiscal imbalances. Moody’s projects the federal debt burden could reach 134% of GDP by 2035, up from 98% in 2024, driven by higher entitlement spending and interest costs.
Market reactions included a temporary rise in Treasury yields, which eased from earlier highs by the market close, signaling a complex investor response balancing risk concerns and safe-haven demand.
Summary
- Moody’s downgraded U.S. credit rating to Aa1 due to rising debt and deficits
- Major U.S. banks’ ratings further downgraded following sovereign cut
- DJIA gained 137 points; S&P 500 up for sixth straight day
- UnitedHealth led gains with an 8% rise; banks underperformed
- Treasury yields rose but retreated by market close amid mixed sentiment
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