US stock futures fell on Monday after Moody’s downgraded the country’s sovereign credit rating, citing mounting concerns over Washington’s $36 trillion debt load and persistent fiscal deficits.
Additionally, U.S. Treasury Secretary Scott Bessent warned on Sunday that tariffs could be reinstated at reciprocal levels if no trade deals are reached during the 90-day negotiation window.
Moody’s lowered the US rating by one notch to ‘Aa1’ from ‘Aaa’ after the markets closed on Friday, warning that rising interest costs and a lack of political consensus over deficit reduction would complicate efforts to manage the federal debt.
It was the last of the three major ratings agencies to strip the US of its top-tier rating, following similar moves by S&P in 2011 and Fitch in 2023.
The downgrade weighed on equity markets in early trading. Futures on the S&P 500 fell 1.2%, while Dow Jones Industrial Average futures were down 0.8% and Nasdaq 100 futures dropped 1.6% as of 6:50 a.m. Eastern time.
Tesla shares fell 4% to $336, while US peers Lucid and Rivian dropped nearly 3% each.
Chinese EV stocks were also under pressure, with Nio, XPeng, and Polestar all sliding more than 3%, and Li Auto down 2%.
Detroit automakers Ford and GM also fell between 1% and 1.50%.
Moody’s said the downgrade reflected the likelihood of rising fiscal strain, particularly in an environment of high borrowing costs and political gridlock. The agency first assigned the US its highest credit rating in 1919.
The cut puts Moody’s assessment in line with those of Fitch and S&P, which both maintain the US at their respective second-highest rating tiers.
