Traders work on the floor of the New York Stock exchange during morning trading on November 10, 2023 in New York City.
Michael M. Santiago | Getty Images
U.S. stock futures inched down Sunday night after Moody’s Investors Service lowered its U.S. credit rating outlook to negative from stable.
Dow Jones Industrial Average futures dipped 43 points, or 0.1%. Futures tied to the S&P 500 and Nasdaq-100 also shed 0.1%.
Moody’s on Friday underscored the U.S.’ “very large” fiscal deficits and partisan gridlock in Washington as contributing factors for the downgrade. The ratings agency reaffirmed America’s credit rating at AAA, the highest level. This comes three months after Fitch lowered the U.S. long-term foreign currency issuer default rating to AA+ from AAA, also citing expected fiscal deterioration, an increasing debt burden and political standoffs on fiscal and debt issues.
“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues,” the agency said. “Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability.”
While there is “zero default risk of U.S. debt,” the lower credit rating outlook remains relevant for its impact on the attractiveness of the debt for foreign investors, said Jay Hatfield, CEO at Infrastructure Capital Management.
“The U.S. has been downgraded because our budget process is completely broken. That’s really the crux of the issue — that there’s no real organized process to pass a budget. That does impact the psyche of global fund ambassadors,” said Hatfield.
On the economic data front, investors will be keeping an eye on October’s monthly federal budget, as well as the Federal Reserve Bank of New York’s October consumer expectations survey. Fed Governor Lisa Cook is also scheduled to give remarks Monday morning. This all comes ahead of the monthly consumer price index data on Tuesday.
The major averages are coming off their second consecutive week of gains. The S&P 500 rose 1.3% the previous week, while the Dow and Nasdaq gained about 0.7% and 2.4%, respectively.