U.S. Markets Hold Steady Despite Credit Downgrade: Key Events Recap
Market news 22 MAY
On Monday, U.S. stock markets showed resilience amid geopolitical and macroeconomic turbulence. The S&P 500 and Nasdaq 100 both gained +0.09%, while the Dow Jones rose by +0.32%. In contrast, futures slightly declined, reacting to early selling pressure.
Trading opened lower after Moody’s downgraded the U.S. credit rating from Aaa to Aa1, citing rising national debt and budget deficits. However, investors largely shrugged off the downgrade, seeing it as expected after similar actions by Fitch and S&P in previous years. Treasury yields initially spiked but later retraced, allowing stocks to recover.
Policy and Economics: Investors Seek Balance
U.S. Treasury Secretary’s comments helped stabilize markets, as he pledged to reduce government spending and boost economic growth. Still, statements from Federal Reserve officials reflected caution regarding monetary policy.
Atlanta Fed President Raphael Bostic said he remains concerned about inflation and expects only one rate cut in 2025. New York Fed President John Williams and Fed Vice Chair Jefferson echoed the view that the Fed should wait for more data before making rate decisions. Jefferson also noted the Fed’s policy remains "moderately restrictive" and well-positioned for now.
Meanwhile, Monday’s economic data disappointed: April’s Leading Economic Index dropped 1% — the biggest decline in two years. Jobless claims and manufacturing data due later this week are expected to show mixed signals, adding to the market’s cautious mood.
Corporate News: Nvidia Leads, M&A Activity Accelerates
Corporate developments provided a more positive backdrop. Nvidia stood out after unveiling next-gen AI systems and announcing a partnership with Foxconn to build an AI supercomputer factory. The company is also reportedly in advanced talks to invest in quantum computing startup PsiQuantum — signaling its ambitions beyond AI.
M&A news added to investor optimism:
Blackstone to acquire TXNM Energy for $11.5 billion;
AMD selling its data center unit to Sanmina for $3 billion;
Dick’s Sporting Goods acquiring Foot Locker;
TransDigm buying Servotronics for $110 million;
Regeneron acquiring 23andMe’s assets for $256 million;
Gladstone acquiring Smart Chemical Solutions to expand its income portfolio.
Other major headlines:
Qualcomm to re-enter the data center market in partnership with Nvidia;
Alibaba under U.S. scrutiny for its AI partnership with Apple in China;
Novavax surged 17% after its COVID-19 vaccine received FDA approval;
Xiaomi announced a $6.9 billion chip investment plan over the next decade.
Global Markets Remain Subdued
European and Asian markets didn’t mirror the U.S. optimism: Euro Stoxx 50 closed flat, while Japan’s Nikkei dropped -0.68%. Investors remain cautious amid uncertainty around tariffs and weak U.S. macroeconomic indicators.
Earnings Season Wrap-Up
Q1 earnings season exceeded expectations: 77% of S&P 500 companies beat analyst forecasts. Earnings growth reached +13.1%, far above the +6.6% initially projected. However, full-year 2025 profit growth forecasts were revised down from +12.5% to +9.4%, reflecting broader economic uncertainty.
Investors continue to weigh strong corporate fundamentals against mixed macro data. Key focus areas include:
The Fed’s next moves on interest rates;
Updates on trade policies and tariffs;
Fresh labor and housing data later this week.
The market’s ability to hold steady despite a sovereign credit downgrade highlights investor confidence in U.S. corporate strength. Going forward, central bank policy and earnings momentum will likely set the tone for market direction in the second half of 2025.