Dow Jones Industrial Average shrugs off Moody’s Treasury downgrade

• The Dow Jones rose on Monday, tapping the 42,800 region.
• Moody’s downgraded US debt late last week, sparking a brief hesitation in investor sentiment.
• Fedspeakers are working double duty ahead of US PMI data later this week.

The Dow Jones Industrial Average (DJIA) gained ground to kick off the new trading week, touching 42,800 for the first time in eight weeks as markets continue to push equity markets back into the high end following this year’s tariff-fueled stock rout.

Moody’s ratings agency stripped the United States (US) of its last remaining AAA rating on its Treasuries last Friday, citing burgeoning US debt and government deficits that successive presidential administrations either refuse to, or are incapable of, bringing under control. Ratings agencies began stripping AAA status from US Treasuries in 2013, and it is the first time Moody’s has downgraded the US since 1913.

Investor sentiment wobbled at the headlines, but quickly recovered and shrugged off the hit to US creditworthiness: even with decaying investment quality, there are functionally no alternatives to Treasury-quality assets, especially when considering the sheer size of the US debt market, which towers over any other potential asset.

Still, not all is perfectly rosy in the Treasury markets: 30-year yields broke above 5% on Monday, and 10-year yields traded north of 4.5%. The last time 10-year yields rose this high, this fast, the Trump administration was forced to pivot away from and effectively cancel its “reciprocal tariff” plans in April.

Fed not in a rush to meet markets in the middle on rate cuts

Federal Reserve (Fed) speakers have hit the ground running this week in an attempt to temper market expectations for rate cuts. All Fed policymakers have been gently but firmly reminding investors that the US’s still-existing tariff and trade policies make it nearly impossible to forecast the domestic economy, and adjust policy rates as a result. The Fed is firmly entrenched in wait-and-see mode, no matter how much rate markets price in future rate cuts. Even though rate traders still hold out hope for a fresh rate-cutting cycle to kick off in 2025, when those rate cuts will begin continues to march further into the calendar. According to the CME’s FedWatch Tool, rate markets are now pricing in a first quarter-point rate trim in September, well back from the June expectations that were priced in less than a month ago.

The key economic data release this week will be S&P Global Purchasing Managers Index (PMI) figures for May. According to median market forecasts, both the manufacturing and services components of the PMI report are expected to decline slightly as tariffs take a bite out of business spending activity.

Read more stock news: UnitedHealth stock fills in the gap as market assesses the bottom is in

Dow Jones price forecast

The Dow Jones Industrial Average continues to march its way back up the charts. The major equity index has closed higher for four consecutive weeks, and is already on its way to a fifth bullish week after a determined start on Monday. The Dow Jones is pushing even further above the 200-day Exponential Moving Average (EMA) near 41,500, and is up nearly 17% from April’s tariff plunge that sent the DJIA down to 36,600.

Dow Jones daily chart

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• The Dow Jones rose on Monday, tapping the 42,800 region.
• Moody’s downgraded US debt late last week, sparking a brief hesitation in investor sentiment.
• Fedspeakers are working double duty ahead of US PMI data later this week.

The Dow Jones Industrial Average (DJIA) gained ground to kick off the new trading week, touching 42,800 for the first time in eight weeks as markets continue to push equity markets back into the high end following this year’s tariff-fueled stock rout.

Moody’s ratings agency stripped the United States (US) of its last remaining AAA rating on its Treasuries last Friday, citing burgeoning US debt and government deficits that successive presidential administrations either refuse to, or are incapable of, bringing under control. Ratings agencies began stripping AAA status from US Treasuries in 2013, and it is the first time Moody’s has downgraded the US since 1913.

Investor sentiment wobbled at the headlines, but quickly recovered and shrugged off the hit to US creditworthiness: even with decaying investment quality, there are functionally no alternatives to Treasury-quality assets, especially when considering the sheer size of the US debt market, which towers over any other potential asset.

Still, not all is perfectly rosy in the Treasury markets: 30-year yields broke above 5% on Monday, and 10-year yields traded north of 4.5%. The last time 10-year yields rose this high, this fast, the Trump administration was forced to pivot away from and effectively cancel its “reciprocal tariff” plans in April.

Fed not in a rush to meet markets in the middle on rate cuts

Federal Reserve (Fed) speakers have hit the ground running this week in an attempt to temper market expectations for rate cuts. All Fed policymakers have been gently but firmly reminding investors that the US’s still-existing tariff and trade policies make it nearly impossible to forecast the domestic economy, and adjust policy rates as a result. The Fed is firmly entrenched in wait-and-see mode, no matter how much rate markets price in future rate cuts. Even though rate traders still hold out hope for a fresh rate-cutting cycle to kick off in 2025, when those rate cuts will begin continues to march further into the calendar. According to the CME’s FedWatch Tool, rate markets are now pricing in a first quarter-point rate trim in September, well back from the June expectations that were priced in less than a month ago.

The key economic data release this week will be S&P Global Purchasing Managers Index (PMI) figures for May. According to median market forecasts, both the manufacturing and services components of the PMI report are expected to decline slightly as tariffs take a bite out of business spending activity.

Read more stock news: UnitedHealth stock fills in the gap as market assesses the bottom is in

Dow Jones price forecast

The Dow Jones Industrial Average continues to march its way back up the charts. The major equity index has closed higher for four consecutive weeks, and is already on its way to a fifth bullish week after a determined start on Monday. The Dow Jones is pushing even further above the 200-day Exponential Moving Average (EMA) near 41,500, and is up nearly 17% from April’s tariff plunge that sent the DJIA down to 36,600.

Dow Jones daily chart

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.