Stocks edged higher on Monday as investors looked past Moody's downgrade of the United States' credit rating and new tariff tensions. The Dow Jones Industrial Average climbed over 100 points, while the S&P 500 Index and Nasdaq Composite ticked above the flatline.
Here's how the market settled on Monday:
S&P 500 Index (NYSE: SPY): +0.09% or +5.22 points to 5,963.60
Dow Jones Industrial Average (NYSE: DIA): +0.32% or +137.33 points to 42,792.07
Nasdaq Composite Index (NASDAQ: QQQ): +0.02% or +4.36 points to 19,215.46
Moody's Rating lowered the United States' sovereign credit rating from the highest possible Aaa to Aa1 late Friday, attributing the downgrade to the federal government's increased budget deficit and higher interest rates. The rating join's Standard & Poor's August 2011 downgrade to AA+ from AAA and Fitch Ratings' cut from AAA to AA+ in August 2023.
"Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," Moody's analysts said in a statement. "We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration."
The downgrade led U.S. Treasurys to spike on Monday, with the 30-year U.S. bond yield rising above 5% at session highs on Monday, while the 10-year yield topped 4.5%. At session lows, the Dow fell more than 300 points and the S&P 500 lost about 1%; major averages pared losses as Treasury yields eased later in the session.
Uncertainty surrounding President Donald Trump's tariff policies re-entered the market again on Monday, after he called for Walmart (NYSE: WMT) to stop attributing price increases to tariffs on foreign imports. Trump told the big box retailer to "EAT THE TARIFFS" in a Saturday post on his social media platfrom Truth Social, adding that he will "be watching and so will [Walmart's] customers."
Walmart said in a statement that it is working to keep prices as low as possible for "as long as we can given the reality of small retail margins."
China also stoked more tariff worries on Monday after Beijing claimed the Trump administration undermined the two nations' preliminary trade agreement by issuing a warning against use of Chinese chips, signaling out Huawei.
"If the U.S. insists on its own way and continues to substantially damage China's interests, China will take resolute measures to safeguard its legitimate rights and interests," a spokesperson for Beijing's Commerce ministry told reporters, quoted by CNBC, responding to U.S. Commerce Department's alert last Tuesday.
Even is the tensions between Beijing and Washington continue to wane, Morgan Stanley Chief Global Economist Seth Carpenter believes recession risks are still present as "tariffs have both direct effects nd indirect effects."
"The data show that the tariffs on China in the first Trump Administration were followed by a drop in industrial production and manufacturing employment," Carpenter wrote in a Monday note. "Tariffs are taxes, and 2/3 of imports from China are capital goods or intermediate inputs. So tariffs on China are in effect a tax on domestic capex and manufacturing."
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JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon said that the largest U.S. bank by many metrics will now allow clients to buy bitcoin, marking a decision shift from his previous criticisms of digital currency and the crypto market.
"We are going to allow you to buy it," Dimon said at the bank's investor day on Monday. However, he said the bank will not custody digital currencies, but rather putting in statements for clients. Peer Morgan Stanley (NYSE: MS) changed its policy in August to allow financial advisors to suggest some spot bitcoin exchange-traded funds to qualifying clients.
"I don't think you should smoke, but I defend your right to smoke," Dimon added. "I defend your right to buy bitcoin."