Downgrade? Tech shrugs it off 20/05/2025

HOT stories for today

US market wrap:

• The S&P 500 notched a modest increase on Monday as Treasury yields retreated from their peaks and market participants looked beyond Moody’s downgrade of the U.S. credit rating. The S&P 500 inched up by 0.09%, marking its sixth consecutive day of gains. The Dow Jones Industrial Average advanced approximately 137 points, or 0.32%, while the Nasdaq Composite edged up by a mere 0.02%.
• Although Monday’s advances were slight, they contribute to what has been a swift and notable rally in equities over the last five weeks. The S&P 500 now sits just 3% below its all-time high. Treasury yields surged after Moody’s cut the U.S. credit rating by one level to Aa1 from Aaa, aligning the agency with its counterparts. The downgrade weighed on bond prices and pushed yields higher—compounding concerns as the economy continues to brace for the broader effects of President Donald Trump’s ongoing tariff strategy. At their peak during the session, the 30-year U.S. bond yield climbed above 5%, while the 10-year yield surpassed 4.5%—levels that dampened stock performance last month and prompted Trump to soften some of his harshest tariff initiatives. Mortgage rates tend to follow the trajectory of the 10-year yield.
   

Downgrade? Tech shrugs it off

• Tech stocks were hit hard during past U.S. credit downgrades, but this time may be different. While Moody’s recent cut from Aaa to Aa1 reflects growing debt and rising interest costs, the move was largely expected after a negative outlook last November. Markets initially dipped on the news, with the S&P 500 and Nasdaq opening lower before recovering. The tech-heavy XLK fund fell 0.8% but later pared losses. The bigger concern for tech is rising bond yields, which make Treasurys more appealing than volatile growth stocks. On Monday, the 10-year yield touched 4.57% and the 30-year briefly topped 5%.
• Still, excitement around AI is helping support tech stocks. Hyperscalers continue investing in AI infrastructure, and easing U.S.-China tariffs have lifted investor confidence. Despite being down 3.5% in 2025, Goldman Sachs expects the "Magnificent Seven" to outperform the broader market, driven by strong earnings growth.

Stocks on the move:

• UnitedHealth (UNH) — Shares of the health insurance giant surged approximately 8.2% as investors bought into the heavily sold-off stock, which had tumbled 23% the prior week. The company has withdrawn its 2025 outlook, announced the CEO’s resignation, and is reportedly under investigation by the U.S. Department of Justice.
• Reddit (RDDT) — The social media platform’s stock fell 4.6% after Wells Fargo downgraded it from “overweight” to “equal weight.” The firm cited ongoing disruptions to Reddit’s search traffic, which may become permanent as Google fully incorporates artificial intelligence into its search engine.
• Tesla (TSLA), Palantir (PLTR) — Shares of retail investor favorites Tesla and Palantir declined over 2% each, as major tech names led Monday’s market downturn.
• Alibaba (BABA) — U.S.-listed shares of the Chinese e-commerce leader dipped 0.4% after a New York Times report indicated the Trump administration is questioning Apple’s intention to use Alibaba’s AI technology in iPhones sold in China.

Today’s action

• Asia-Pacific markets advanced on Tuesday after China reduced key lending rates by 10 basis points in an effort to stimulate its economy, which faces headwinds from escalating trade tensions. The People’s Bank of China lowered the 1-year loan prime rate (LPR) from 3.1% to 3.0%, and cut the 5-year LPR from 3.6% to 3.5%. In response, Hong Kong’s Hang Seng Index gained 1.28%, Japan’s Nikkei 225 rose 0.45%.
• Meanwhile, U.S. stock futures were relatively flat Monday night as investors awaited signs of whether the recent market rally could maintain its momentum. Futures tied to the S&P 500  nudged up by less than 0.1%, while Nasdaq 100 futures slipped slightly. Dow Jones Industrial Average futures  advanced by 44 points, or around 0.1%. On Tuesday, earnings reports are expected to shape sentiment around the U.S. economy. Home Depot (HD) will announce results in the morning, while Toll Brothers (TOL) is set to report after market close. Market participants will also watch for remarks on monetary policy from Federal Reserve officials, including a speech by St. Louis Fed President Alberto Musalem.

Watchlist: NVDA, META, HD, TOL, PLTR, TSLA, NFLX

Bitcoin

• Bitcoin has reclaimed the $105,000 level, trading at $105,166.72 after a modest 0.48% dip in the past 24 hours, according to CoinMarketCap. The leading cryptocurrency fluctuated between $102,112.69 and $107,068.72 during the day, pushing its weekly gain to 2.10%. 
• The slight pullback appears to be a brief pause following strong recent momentum. Bitcoin’s continued rise could signal that investors are turning to crypto as a hedge, anticipating further U.S. dollar debasement amid rising debt and potential money printing following Moody’s downgrade of the U.S. credit rating.
  Watchlist: Bitcoin: 74 000-107 000, Ethereum:1500-2800, Solana: 80-180
   

Forex

• EUR/USD remains stuck in a short-term consolidation zone, though Monday’s intraday action saw the pair briefly approach the 1.1300 level before pulling back slightly. With limited economic data on tap this week, market sentiment and headlines continue to steer direction. All eyes now turn to Thursday’s Eurozone and U.S. PMI releases, which could provide a catalyst for a breakout.
• The Japanese yen (JPY) recovered early losses on Tuesday, climbing toward recent highs amid renewed expectations of a 2025 rate hike by the Bank of Japan. Meanwhile, the U.S. dollar remains under pressure on growing bets that the Federal Reserve will continue easing. The USD/JPY pair slid below the key 145.00 level, although fading safe-haven demand limited the yen’s broader gains.
  Watchlist: EUR/USD: 1.0700-1.1600, USD/JPY: 140-151

Basic Materials

• Gold (XAU/USD) edged lower during Tuesday’s Asian session, giving back Monday’s gains amid upbeat market sentiment. Despite expectations of a Fed rate cut and a weaker U.S. dollar, the precious metal struggled to attract buyers. Optimism over the 90-day U.S.-China trade truce continued to lift equities, reducing demand for traditional safe-haven assets—even in the face of Moody’s surprise U.S. credit downgrade and ongoing geopolitical risks.
• WTI crude oil traded around $62.10 early Tuesday in Asia, supported by rising tensions in U.S.-Iran nuclear talks, which could collapse over uranium enrichment terms. However, gains may be capped by Moody’s U.S. credit downgrade and signs of slowing consumer activity in China, both of which could weigh on demand outlook.
  Watchlist: GOLD 2600-3500, US Oil: 55.60-70.00
  
   

Key Economic Events Today:

EST time
09:00 am: USD FOMC Member Barkin Speaks
09:00 am: USD FOMC Member Bostic Speaks
01:00 pm: USD FOMC Member Musalem Speaks


Earnings

BMO (Before the US Market opens)
HD                Home depot
VIK                Viking Holdings
AMC (After the US Market closes): PANW, KEYS, ZTO
 

The TEFS Analyst team wishes you a successful day!