US stock futures fell slightly Sunday night after Moody's Investors Service downgraded the United States' credit rating outlook to negative from stable. Futures for the Dow Jones Industrial Average fell 54 points, or 0.1%. Futures on the S&P 500 and Nasdaq-100 both fell 0.2%.Moody's cited the United States' "very large" budget deficits and party deadlock …
US stock futures fell slightly Sunday night after Moody’s Investors Service downgraded the United States’ credit rating outlook to negative from stable. Futures for the Dow Jones Industrial Average fell 54 points, or 0.1%. Futures on the S&P 500 and Nasdaq-100 both fell 0.2%.
Moody’s cited the United States’ “very large” budget deficits and party deadlock in Washington as contributing causes to the downgrade on Friday. America’s credit rating was maintained at AAA, the highest level, by the ratings agency. This comes three months after Fitch downgraded the United States’ long-term foreign currency issuer default rating from AAA to AA+, citing predicted fiscal deterioration, an increased debt load, and political gridlock on fiscal and debt issues.
“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues,” the Bureau of Economic Analysis stated. “Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability.”
While there is “zero default risk of U.S. debt,” the lower credit rating outlook remains significant for its influence on the debt’s attractiveness to international investors, according to Jay Hatfield, CEO of Infrastructure Capital Management.
“The United States has been demoted because our budget process is completely broken.” That is the essence of the problem: there is no truly organized mechanism for passing a budget. That has an effect on the minds of global fund ambassadors,” said Hatfield.
On the economic front, investors will be watching the monthly federal budget for October, as well as the Federal Reserve Bank of New York’s October consumer expectations survey. Fed Governor Lisa Cook is also set to speak Monday morning. This all comes ahead of Tuesday’s monthly consumer price index report.
The main averages have gained for the second week in a row. The S&P 500 gained 1.3% the previous week, while the Dow and Nasdaq gained 0.7% and 2.4%, respectively.
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