S&P 500: Moody’s Downgrade and Yield Spike Sink Tesla, Walmart, and Tech Stocks

S&P 500 Futures Slide as Moody’s Downgrade and Rising Yields Hit Risk Appetite

U.S. equity futures tumbled early Monday, led by a sharp drop in tech stocks, as traders reacted to Moody’s downgrade of the U.S. credit rating. The move triggered a spike in Treasury yields, adding pressure to risk assets. Dow futures fell 264 points, or 0.6%, while S&P 500 and Nasdaq-100 futures lost 1.1% and 1.5%, respectively.

The rating agency lowered the U.S. sovereign rating by one notch to Aa1, citing concerns over widening budget deficits and the challenge of refinancing existing debt in a high-rate environment.

The 30-year Treasury yield jumped above 5% and the 10-year yield surpassed 4.5%, levels that previously weighed on stocks and borrowing costs across the economy. The downgrade, while largely symbolic, amplifies market concern about the sustainability of U.S. fiscal policy.

Are Rising Treasury Yields the New Market Headwind?

Moody’s move underscores structural concerns in the Treasury market, with higher yields dampening demand for riskier assets. “The fundamental factor of less foreign demand and growing debt loads remains unchanged,” said Peter Boockvar of Bleakley Financial Group. Elevated yields directly impact consumer and corporate loans, potentially slowing economic activity and eroding corporate margins.

Recent easing in trade tensions had lifted investor sentiment, with major indexes recording strong gains last week. But Monday’s yield surge is reviving fears that higher borrowing costs could derail any recovery in market momentum.

Which Tech Stocks Are Leading the Sell-Off?

Technology stocks were hit hardest in premarket trade. Tesla dropped 4% following the launch of a rival SUV from China’s Xiaomi. Palantir also slid 4%, and Nvidia lost nearly 3% despite unveiling a new chip integration program. Netflix fell 1.8% after a downgrade from JPMorgan citing valuation concerns.

How Are Consumer and Retail Stocks Reacting?

Walmart declined 2% after President Trump said the retailer should absorb tariffs instead of raising prices. Alibaba shares dropped 2% after reports that the U.S. is raising concerns about Apple’s use of its AI technology in China. Reddit tumbled 7% after Wells Fargo downgraded the stock, citing long-term disruption from AI-powered search engines.

Are There Any Notable Gainers?

In energy, TXNM Energy surged 9% after agreeing to be acquired by Blackstone’s infrastructure unit at $61.25 per share. UnitedHealth gained 4%, bouncing back after a steep loss last week tied to management turnover and DOJ scrutiny. Bath & Body Works edged higher after naming a new CEO to replace Gina Boswell.

What Should Traders Watch Next?

Traders are now focused on upcoming economic data and Federal Reserve commentary, which could shape near-term rate expectations. The downgrade and higher yields may increase pressure on the Fed to weigh financial stability risks. For now, persistently elevated yields are likely to cap equity upside, particularly in growth-sensitive sectors.

More Information in our Economic Calendar.