Stocks Set to Open Sharply Lower After U.S. Credit Rating Downgrade, Retail Earnings and Economic Data Awaited

June S&P 500 E-Mini futures (ESM25) are down -1.22%, and June Nasdaq 100 E-Mini futures (NQM25) are down -1.59% this morning as sentiment took a hit after rating agency Moody’s downgraded the United States’ credit rating.

Late Friday, Moody’s Ratings lowered the U.S. credit score by one notch to Aa1, aligning with Fitch Ratings and S&P Global Ratings in grading the world’s largest economy below the top, triple-A position. Moody’s said the downgrade “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.” Speaking on NBC’s Meet the Press with Kristen Welker on Sunday, U.S. Treasury Secretary Scott Bessent dismissed concerns about the government’s debt, calling Moody’s a “lagging indicator.”

This week, investor focus is on a fresh batch of U.S. economic data, remarks from Federal Reserve officials, and earnings reports from retail heavyweights.

In Friday’s trading session, Wall Street’s major equity averages closed higher. CoreWeave (CRWV) soared over +22% after a 13G filing revealed that Nvidia raised its stake in the cloud-computing provider to 7% from 5.2%. Also, recently beaten-down healthcare stocks rallied, with UnitedHealth Group (UNH) climbing more than +6% to lead gainers in the S&P 500 and Dow and Moderna (MRNA) rising over +5%. In addition, Archer Aviation (ACHR) surged more than +9% after being selected as the Official Air Taxi Provider for the 2028 Los Angeles Olympic and Paralympic Games. On the bearish side, Applied Materials (AMAT) slumped over -5% and was the top percentage loser on the S&P 500 and Nasdaq 100 after the semiconductor equipment maker provided a tepid FQ3 revenue forecast.

Economic data released on Friday showed that the University of Michigan’s U.S. consumer sentiment index unexpectedly fell to a nearly 3-year low of 50.8 in May, weaker than expectations of 53.1. Also, U.S. April housing starts rose +1.6% m/m to 1.361M, stronger than expectations of 1.360M, while building permits, a proxy for future construction, fell -4.7% m/m to 1.412M, weaker than expectations of 1.450M. In addition, the U.S. import price index unexpectedly rose +0.1% m/m in April, stronger than expectations of -0.4% m/m.

Atlanta Fed President Raphael Bostic said on Friday that he anticipates the U.S. economy will slow this year but avoid a recession, and reaffirmed his expectation for one interest rate cut in 2025.

U.S. rate futures have priced in a 91.7% chance of no rate change and an 8.3% chance of a 25 basis point rate cut at the Fed’s monetary policy committee meeting next month.

Meanwhile, a key House committee advanced U.S. President Donald Trump’s massive tax and spending package after Republican hardliners secured a deal with party leaders to accelerate cuts to Medicaid health coverage.

This week, market participants will keep a close eye on U.S. economic data releases for clues on how tariffs and the uncertainty surrounding them are affecting the economy. Preliminary purchasing managers’ surveys for May will provide a timely snapshot of the health of the U.S. manufacturing and services sectors as tariffs begin to take a greater toll on businesses. Other noteworthy data releases include U.S. Existing Home Sales, Initial Jobless Claims, and New Home Sales.

“Global activity is still showing resilience, including in the U.S., where continued frontloading is supporting the ‘hard data,’” Citi analysts said in a recent note. However, they noted that ‘soft data,’ including activity and confidence surveys, “paint a potentially grimmer picture, particularly in the U.S., where consumer and business confidence are still deteriorating.”

Investors will also monitor speeches from Fed officials as they look for signals on whether policymakers are moving closer to cutting interest rates following the latest soft inflation data. Bostic, Williams, Jefferson, Logan, Musalem, Daly, and Hammack are scheduled to speak this week.

In addition, retailers such as Home Depot (HD), TJX Companies (TJX), Lowe’s (LOW), Target (TGT), and Ross Stores (ROST), along with notable companies like Palo Alto Networks (PANW), Medtronic (MDT), Snowflake (SNOW), Intuit (INTU), and Analog Devices (ADI), are slated to release their quarterly results this week. Investors will closely watch retail earnings for indications of consumer weakening amid reports of waning sentiment and worries that tariffs could push prices higher.

Today, investors will focus on the Conference Board’s Leading Economic Index for the U.S., which is set to be released in a couple of hours. Economists expect the April figure to be -0.7% m/m, the same as in March.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.544%, up +2.37%.

The Euro Stoxx 50 Index is down -0.48% this morning as sentiment was dampened by the U.S. credit rating downgrade and weak economic data from China. Energy and technology stocks led the declines on Monday. Luxury stocks also slumped after April retail sales data from China came in below expectations. Final data from Eurostat confirmed on Monday that the Eurozone’s annual inflation rate stood at 2.2% in April, unchanged from March. Meanwhile, the European Commission said on Monday that the Eurozone economy will grow just 0.9% this year, down from the 1.3% forecast made last November. In 2026, Eurozone growth is expected to pick up to 1.4%, though that remains below the 1.6% forecast the Commission issued six months ago. “The outlook for growth is revised significantly downward. This largely owes to a weakening global trade outlook and higher trade policy uncertainty,” the Commission said. In other news, CNBC reported that the U.K. and European Union reached an agreement on Monday to reset relations. On the geopolitical front, investors are closely monitoring developments on a ceasefire in Ukraine as U.S. President Donald Trump is scheduled to hold a call with Russian President Vladimir Putin later today. In corporate news, Ryanair Holdings Plc (RYA.I.DX) gained over +4% after the budget airline posted better-than-expected annual results.  

Eurozone’s CPI and Eurozone’s Core CPI data were released today.

Eurozone April CPI came in at +0.6% m/m and +2.2% y/y, in line with expectations.

Eurozone April Core CPI arrived at +1.0% m/m and +2.7% y/y, in line with expectations.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed flat, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.68%. 

China’s Shanghai Composite Index ended flat today as investors digested the latest batch of economic data from the country, which underscored ongoing economic challenges. Consumer stocks underperformed on Monday. At the same time, shipping and port stocks continued to surge on hopes that the de-escalation in the U.S.-China trade war would spur a recovery in shipping demand and freight rates. Analysts at China Securities Co. said the tariff reprieve may “spur a shipment rush that leads to a burst of businesses” for port operators. Data from the National Bureau of Statistics released on Monday showed that growth in China’s industrial output and retail sales slowed in April amid shocks from steep U.S. tariffs announced last month. Also, data showed that new home prices remained lukewarm last month, reflecting persistent downward pressure despite efforts to stabilize the sector. Meanwhile, Goldman Sachs economists stated that the weakening of China’s April activity data reflects both the adverse effects of higher U.S. tariffs and persistently weak domestic demand. In other news, China imposed anti-dumping duties of up to 74.9% on imports of POM copolymers, a type of engineering plastic, from the U.S., the EU, Japan, and Taiwan. In corporate news, ZTO Express rose over +4% in Hong Kong after Hang Seng Indexes Co. announced the company would be added to the Hang Seng Index early next month. Investor focus now turns to the People’s Bank of China’s decision on key lending rates, with a 10 bps cut anticipated for both the one-year and five-year loan prime rates.

The Chinese April Industrial Production stood at +6.1% y/y, stronger than expectations of +5.7% y/y.

The Chinese April Retail Sales came in at +5.1% y/y, weaker than expectations of +6.0% y/y.

The Chinese Fixed Asset Investment came in at +4.0% y/y in the January-April period, weaker than expectations of +4.4% y/y.

The Chinese April Unemployment Rate was 5.1%, stronger than expectations of 5.2%.

Japan’s Nikkei 225 Stock Index ended lower today, tracking steep losses in U.S. stock futures following Moody’s downgrade of the U.S. government credit rating. Insurance and electronics stocks slumped on Monday, while pharmaceutical stocks outperformed. The Moody’s downgrade sparked concerns about a potential flight from U.S. assets, leading to a stronger yen. A stronger yen typically pressures exporter shares by diminishing the value of overseas earnings when converted back into Japanese currency. Also, uncertainties remain around the scope and impact of the ongoing U.S.-Japan trade negotiations. U.S. Treasury Secretary Scott Bessent warned that trade partners would be hit with maximum tariffs if they failed to negotiate with the U.S. in “good faith.” Meanwhile, Bank of Japan Deputy Governor Shinichi Uchida told parliament on Monday that the central bank will proceed with interest rate hikes if the economy recovers from the anticipated impact of higher U.S. tariffs, while cautioning that the outlook remains highly uncertain. In other news, Japanese Prime Minister Shigeru Ishiba said on Monday that the country will refrain from implementing tax cuts financed through additional debt issuance. Investor focus this week is on a slew of key economic data from the country, including exports and imports, machine orders, and PMI, all of which will offer insights into the impact of U.S. President Donald Trump’s trade war. Japan’s national core CPI, scheduled for release on Friday, will also be closely watched. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +4.75% to 24.03.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks are moving lower in pre-market trading amid risk-off sentiment after Moody’s downgraded the U.S.’s credit rating. Tesla (TSLA) is down over -4%, and Nvidia (NVDA) is down more than -3%.

Chip stocks retreated in pre-market trading following the Moody’s downgrade, with Advanced Micro Devices (AMD), Marvell Technology (MRVL), and ON Semiconductor (ON) falling more than -2%.

Netflix (NFLX) slid over -2% in pre-market trading after JPMorgan downgraded the stock to Neutral from Overweight.

Reddit (RDDT) slumped more than -6% in pre-market trading after Wells Fargo downgraded the stock to Equal Weight from Overweight.

TXNM Energy (TXNM) surged over +9% in pre-market trading after Blackstone Infrastructure agreed to acquire the utility company for about $5.7 billion.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - May 19th

ICL Israel Chemicals (ICL), Agilysys (AGYS), ZIM Integrated Shipping Services (ZIM), Oxford Lane (OXLC), Yalla (YALA), Global Ship Lease (GSL), Transcat (TRNS), Target Hospitality (TH), Safe Bulkers (SB), Gilat (GILT), Sohu.Com (SOHU), Niu Tech (NIU), 8x8 (EGHT), Compugen (CGEN).