Closing Recap

U.S. stocks staged an impressive rebound from sharp morning lows, with the S&P 500 extending its win streak to six days as “buy the dip” sentiment prevailed despite a U.S. credit downgrade; gold rallied, oil recovered, the dollar weakened, and Treasury yields ended higher after initial spikes. 

Key Takeaways 

• Sharp Reversal to Gains: Equities erased steep pre-market and early losses (S&P futures were down >1%) to finish mostly positive, showcasing strong dip-buying interest. S&P 500 now up 6 straight days. 
• US Credit Downgrade Digested: Moody’s downgrade of the U.S. credit rating late Friday initially pressured markets, but the impact seemed to fade as the day progressed. 
• Healthcare Leads Rebound: Healthcare (XLV) was the best performing sector, with UNH rallying for a second day, helping to lift the broader market. Energy was the biggest drag. 
• Negative Breadth Despite Rally: Despite the headline index gains, overall market breadth remained negative, with decliners outpacing advancers. 
• Gold Rallies on Safe Haven & Weak Dollar: Gold prices climbed significantly, benefiting from safe-haven demand following the downgrade and a weaker U.S. dollar. 
• Oil Recovers from Lows: Crude oil prices erased earlier declines, driven by improving broader market sentiment throughout the day. 
• Yields Rise, Dollar Slips: Treasury yields, especially longer-dated, ended higher after spiking sharply early on the downgrade news. The U.S. dollar weakened broadly. 
• Tariff Concerns Linger: Treasury Secretary Bessent’s weekend comments about tariffs reverting if good faith negotiations fail maintained underlying trade uncertainty. 

Market Overview 

U.S. equity markets demonstrated remarkable resilience today, executing a significant turnaround after opening sharply lower. The initial selling pressure was a direct response to Moody’s decision late Friday to downgrade the U.S. credit rating to AA1 from AAA, citing concerns over the nation’s escalating debt. This news, which meant all three major rating agencies have now stripped the U.S. of its top-tier rating, initially sent Treasury yields spiking and stock futures tumbling. All eleven S&P sectors opened in the red. 

Index	Up/Down	% Change	Last
DJ Industrials	137.2	0.0032	42791
S&P 500	5.22	0.0009	5963
Nasdaq	4.36	0.0002	19215
Russell 2000	-8.82	-0.0042	2104

However, as the trading day progressed, investors appeared to shrug off the downgrade, adopting a “buy the dip” mentality that has characterized market behavior over the past few weeks. Stocks steadily climbed off their morning lows, and by the close, the S&P 500 had secured its sixth consecutive day of gains, with seven of the eleven sectors finishing in positive territory. The healthcare sector was a notable outperformer, with UnitedHealth Group (UNH) extending its recent rebound. Despite the positive finish for the major averages, overall market breadth remained negative, indicating that the recovery was somewhat selective. 

Trading volume was reportedly light, typical for a Monday following a significant options expiration Friday and ahead of key earnings, like Home Depot (HD) tomorrow. Lingering in the background were comments from Treasury Secretary Scott Bessent over the weekend, reiterating that President Trump could reinstate high tariffs if trading partners do not negotiate in “good faith.” This, coupled with weaker-than-expected economic data out of China, highlighted ongoing global economic and trade uncertainties, even as U.S. markets showed an inclination to rally.

Economic Data: 

The main economic data point yesterday was weaker-than-expected activity figures from China, adding to global growth concerns. 

• China Economic Data (Apr – Released Mid-May): Retail Sales: Slowed to +5.1% y/y (vs. 5.8% est., 5.9% prior).
• Industrial Production: Rose +6.1% y/y (vs. 5.7% est., 7.7% prior). 
• Fixed Asset Investment (YTD): +4.0% (vs. 4.2% est., 4.2% prior). 
• Property Investment (YTD): Fell by a quicker -10.3%. 
• No major U.S. economic data releases were scheduled. 

Commodities, Currencies, and Treasuries 

Gold prices surged, with June futures gaining $46.30 (+1.45%) to settle at $3,233.50 per ounce. The rally was fueled by safe-haven demand following the U.S. credit downgrade by Moody’s and a broadly weaker U.S. dollar, helping gold recover from its worst weekly performance of the year. Crude oil prices recovered from earlier declines to finish modestly higher, with WTI up $0.20 at $62.69/bbl. Oil initially fell on global growth concerns stemming from the U.S. downgrade and mixed China data but found support as broader market sentiment improved throughout the day. Treasury yields ended higher after a volatile session. The 10-year yield rose about 3 basis points to 4.471%, after earlier spiking above 4.56% (and the 30-year above 5%) in reaction to the Moody’s downgrade, before paring those gains. The U.S. dollar index weakened about -0.6%, falling against the Euro, Yen, and Swiss Franc, pressured by the credit downgrade and debt concerns.

Asset	Up/Down	Unit / % Change	Last
WTI Crude	0.2	USD/bbl	62.69
Brent	0.13	USD/bbl	65.54
Gold	46.3	USD/oz	3233.5
EUR/USD	0.0064	USD	1.1227
USD/JPY	-0.59	JPY	145.05
10-Year Note	0.032	%	0.04471

Looking Ahead 

The market will continue to digest the implications of the Moody’s U.S. credit downgrade and monitor Treasury yield movements closely. Earnings season continues, with Dow component Home Depot (HD) reporting tomorrow morning, providing insights into consumer health and the housing market. Numerous Federal Reserve speakers are scheduled throughout the week, whose comments on the economy, inflation, and policy will be scrutinized. Trade headlines, while quieter today, remain a potential source of volatility, especially given Secretary Bessent’s recent conditional statements on tariffs.