This was quite unexpected because agencies tend to prepare the ground before making such moves. The rationale behind the downgrade was not mysterious: a $36 trillion national debt and an enduring appetite for more. Moody's argues that the country's public debt and interest payments are significantly higher than those of other countries with comparable ratings. Growing debt, chronic deficits and a Congress that, administration after administration, remains unable to find common ground to get the budget back on track. The agency believes that the budget deficit will reach nearly 9% of GDP by 2035 (6.4% today) with public debt climbing to 134% of GDP, compared with 98% in 2024. Interest payments alone would then absorb nearly 30% of federal revenues.

U.S. stock futures slipped this morning, with Future Dow Jones down 0.6%, Future S&P 500 losing 1.0% and Nasdaq 100 Future falling 1.4%.

More telling were the bond markets, where the true anxiety of American credibility finds its outlet. The yield on the 10-year Treasury rose by eleven basis points to 4.547%, and the 30-year breached the 5% mark for the first time since the spring thaw. 

Tech stocks took a hit. Tesla skidded down 3.8%, while chipmakers like AMD and Nvidia shed more than 2%. 

Globally, the mood is no more sanguine. Europe’s STOXX 600 and Japan’s Nikkei are also down. Chinese economic data hinted at a deeper malaise—less a stumble than a slow drift downward, the kind of undercurrent that moves quietly beneath official narratives. The country announced a stronger-than-expected rise in industrial production in April, while retail sales rose but less than economists had forecast. Other statistics to watch this week include the May PMI activity indicators for major economies, due on Thursday.

Back in Washington, Treasury Secretary Scott Bessent attempted to swat away the downgrade with bureaucratic finesse, calling it a distraction while delivering a veiled threat: maximum tariffs on those not negotiating in “good faith.” His tone, a blend of corporate gravitas and geopolitical menace, did little to comfort investors. 

Rival firm S&P downgraded the US back in 2011 - and was promptly pilloried. The Obama administration led the charge, but the backlash was bipartisan. S&P's executives faced threats, its clients walked, its CEO exited, and the firm was eventually slapped with a hefty fine - officially unrelated to the downgrade, of course. If history is any guide, outrage in Washington knows no party lines. Nor does retribution.

Let's continue this column with a staggering figure: +17.4%. This is the increase posted by the Nasdaq 100 over the trading month, i.e. between the third Friday in April and the third Friday in May. This is quite simply the biggest increase ever recorded in the 21st century by the technology index. That shows how strong the momentum is right now. For several strategists at major investment banks, it's a sign that people have shifted from thinking “Trump's tariffs will cause the US economy to collapse” to “Trump's tariffs sting, but they won't derail the formidable US machine.” All in the space of a month.

What should we take away from the start of this new week? That despite the countermeasures aimed at Moody's, investors are more nervous than they were on Friday. The issue of the US budget and debt is never far from the headlines, but it has been brought back into the spotlight by the agency. That said, the market has a short memory, so it may well be alarmed this morning and forget all about it tomorrow. 

There are plenty of scheduled or rumored meetings this week. JD Vance and Ursula Von der Leyen. European leaders with Volodymyr Zelensky. Volodymyr Zelensky with JD Vance and Marco Rubio. The Europeans with Donald Trump. Donald Trump with Volodymyr Zelensky. Vladimir Putin with Donald Trump. Two conclusions can be drawn from this. First, these people would probably save time by meeting all together. Second, the more people there are, the harder it is to agree.

In other news, Donald Trump's tax cut package has cleared a key congressional hurdle after being blocked for several days due to disagreements among Republicans.

On the corporate front, the earnings season is coming to an end. The pace is slowing significantly, although a few names such as Diageo, Palo Alto, Ryanair, Julius Bär and Generali should still provide some excitement. Several US retailers, such as The Home Depot and Target, will also be closely watched after the Walmart episode: the retailer said it was forced to raise prices due to tariffs, while Trump strongly recommended that it absorb the shock without passing it on to consumers.

Today's economic highlights:

On today's agenda: in Switzerland, industrial production and retail sales year-on-year; in Spain, the consumer price index month-on-month and year-on-year; in the United States, the leading index. See the full calendar here.

  • Dollar index: 100,330
  • Gold: $3,235
  • Crude Oil (BRENT):$65.25 (WTI) $61.80
  • United States 10 years: 4.54%
  • BITCOIN: $102,575

In corporate news:

  • JPMorgan Chase anticipates increased charge-offs in its card portfolio by 2026, with investors seeking clarity on tariff impacts and succession plans.
  • Blackstone and its infrastructure arm acquired TXNM Energy in deals totaling $11.5 billion.
  • Sanmina acquired ZT Systems' data center infrastructure manufacturing business from AMD for up to $3 billion.
  • Novavax shares surged after FDA approval of its COVID-19 vaccine for older adults and individuals with certain conditions.
  • Boeing faces opposition from 737 MAX crash victims' families over a deal to avoid prosecution.
  • Nvidia is expanding its AI technology presence by showcasing new tech at Computex, launching NVLink Fusion and DGX systems, updating humanoid robot software, partnering with Foxconn for an AI factory in Taiwan, and negotiating investments in quantum computing startup PsiQuantum.
  • Microsoft has announced plans to develop AI agents capable of collaborating and retaining memories from their interactions.

Analyst Recommendations:

  • Charter Communications, Inc.: Raymond James upgrades to market perform from underperform. Loop Capital Markets upgrades to buy from hold with a price target raised from USD 430 to USD 510.
  • Cognizant Technology Solutions Corporation: JP Morgan upgrades to overweight from neutral with a target price raised from USD 88 to USD 98.
  • Eli Lilly And Company: CTBC Securities Investment Service Co LTD downgrades to add from buy with a target price reduced from USD 980 to USD 833.
  • Netflix, Inc.: JP Morgan downgrades to neutral from overweight with a target price raised from USD 1150 to USD 1220.
  • Solventum Corporation: Piper Sandler & Co upgrades to overweight from neutral with a target price raised from USD 78 to USD 87.
  • Amd (Advanced Micro Devices): SPDB International Holdings Ltd maintains its buy recommendation with a price target reduced from 168.70 to USD 134.20.
  • First Solar, Inc.: Goldman Sachs maintains its buy recommendation and raises the target price from USD 204 to USD 255.
  • Take-Two Interactive Software, Inc.: Huatai Research maintains its buy recommendation and raises the target price from USD 213.60 to USD 259.30.
  • Tesla, Inc.: SPDB International Holdings Ltd maintains its hold recommendation with a price target raised from 210.80 to USD 374.80.
  • Voya Financial, Inc.: Morgan Stanley maintains its overweight recommendation and raises the target price from 70 to USD 86.