Stocks wobbled, the dollar slipped and bond yields jumped after a rating downgrade highlighted worries about the cost of President Trump’s policies and the health of the economy.
Turbulent trading hit financial markets on Monday, with U.S. stocks fluctuating while bonds and the dollar lost value, an ugly combination that suggests sentiment is souring on the outlook for the world’s largest economy.
The S&P 500 index dropped in early trading, but recovered to trade roughly flat in the afternoon. Bond markets shuddered, with U.S. Treasury prices falling and their yields, which underpin interest rates across the economy, rising. The 10-year yield jumped to just under 4.5 percent. The dollar also fell, with a gauge of its value against other major currencies slipping 0.7 percent.
One factor jarring markets is a bill in Congress that would make President Trump’s signature 2017 tax cuts permanent and could add trillions of dollars to federal debt. A House committee voted to approve the bill Sunday night, although it was expected to remain a focus of contentious congressional debate.
The United States’ loss of its last triple-A credit rating late on Friday and mounting concerns about government debt have threatened to disrupt the relative calm in markets that has prevailed since Mr. Trump paused many of his tariffs in recent weeks.
In downgrading the U.S. credit rating, Moody’s cited the tax cut legislation along with broader concerns about the fiscal deficit and growing debt costs. The move by Moody’s means that all three major rating agencies no longer consider the United States qualified for their top credit ratings.
The U.S. credit rating downgrade and worries about debt and deficits could further upset financial markets if they begin to shake the safe-haven status of Treasury bonds. That would likely spur global investors to demand higher premiums in return for buying U.S. debt.
