Markets Rally: S&P 500 Extends Win Streak to Six Days Despite Moody’s Downgrade

US stocks staged a remarkable comeback on Monday, with the S&P 500 managing to notch its sixth consecutive day of gains despite early pressure from Moody’s downgrade of the United States’ credit rating. After initially falling, all three major indexes rebounded to finish in positive territory, with the Dow Jones Industrial Average climbing 0.3%, the S&P 500 edging up nearly 0.1%, and the Nasdaq Composite rising just above the flat line, according to Yahoo Finance.

The market’s resilience comes after Moody’s cut the US government’s long-term credit rating from AAA to AA1 late Friday, citing concerns about escalating deficits and the increasing burden of refinancing US debt amid elevated interest rates. The downgrade brings Moody’s in line with Fitch and S&P, which previously stripped the US of its top-tier rating.

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Markets Overcome Early Pressure

Monday’s trading began with significant pressure on equities as bond yields surged in response to the credit downgrade. The benchmark 10-year Treasury yield climbed toward the key 4.5% level, while the 30-year yield briefly topped 5% — a milestone not seen since late 2023. However, as the session progressed, yields retreated from their highs, helping stocks recover.

This pattern of resilience has been a theme in recent market action. As CNBC reported, the S&P 500 has surged nearly 20% over the past 27 trading days and now sits just 3% below its record high despite continued uncertainty around the effect of tariffs on the economy and recession concerns.

Ryan Detrick, chief market strategist at Carson Group, emphasized the significance of this rally, telling CNBC’s “Closing Bell: Overtime” on Monday: “That’s not a bear market rally. That’s not a short-covering rally.” Instead, Detrick suggested the market is signaling more fundamental strength than many analysts acknowledge.

Sector Performance Mixed

Within the market, performance was mixed across sectors. UnitedHealth stood out as a major winner, rising 8% after a recent bout of hard selling. The healthcare giant had previously been under pressure following reports of a Department of Justice investigation and the departure of its CEO.

Tech stocks faced some challenges, with shares of Nvidia dropping around 3% following CEO Jensen Huang’s announcements at the Computex Taipei tech expo. Cryptocurrencies continued their recent strength, with Bitcoin hovering near $105,000 per token, its highest level since January.

According to Bloomberg, the S&P 500’s current six-day winning streak puts it “a whisker away from a bull market,” as it has climbed nearly 20% from its April 8 lows. This remarkable recovery comes after initial steep losses following President Trump’s April 2 “reciprocal” tariff announcements.

Investors Eye Trade Developments

The market’s continued climb has been bolstered by recent progress on the trade front. Last week, investors cheered a deal between the US and China to temporarily slash tariffs, pushing the Nasdaq Composite up more than 7%, the S&P 500 over 5%, and the Dow more than 3%.

Investors are now watching for further developments in global trade negotiations, including Treasury Secretary Scott Bessent’s weekend remarks that countries would see a return to April 2 “reciprocal” tariff levels if they don’t negotiate in good faith.

Morgan Stanley strategist Michael Wilson suggested that investors should buy any dips in US stocks fueled by the credit rating cut, as the trade truce with China has reduced the odds of a recession. This positive outlook has helped maintain investor confidence despite lingering concerns about the US fiscal situation.

Looking Ahead

As markets move forward, investors will be closely monitoring corporate earnings for insights into the health of the US economy. Upcoming reports from retail giant Home Depot and homebuilder Toll Brothers will provide valuable perspectives on consumer spending and the housing market.

The Federal Reserve’s next policy decisions will also remain in focus, with markets currently pricing in about 75 basis points of rate cuts by the Fed for 2025, with the first easing likely at the central bank’s July meeting.

For now, however, the market’s resilience in the face of multiple challenges—from credit downgrades to tariff uncertainties—suggests that investor sentiment remains surprisingly robust despite acknowledged headwinds.