US open: Stocks pull back from 12-week high as uncertainty builds

(Sharecast News) - US stocks fell from the off on Monday as investors reacted to a downgrade of America's credit rating and concerning comments about potential tariff hikes from the head of the Treasury.

By 1004 ET, the Dow as down 0.1%, the S&P 500 fell 0.4% while the Nasdaq dropped 0.6%. Stocks had pared losses slightly with pre-market futures trading showing much bigger declines.

Nevertheless, the weaker open follows a strong performance across all three markets over the past few weeks, with the S&P 500 in particular having now jumped 20% since hitting a yearly low on 9 April. On Friday, the index finished at its highest level since 26 February.

Moody's on Friday cut its rating on US government debt from the highest rating Aaa to Aa1 as a result of the country's eye-watering $36trn debt pile and growing interest costs. The downgrade means that none of the three major credit ratings agencies now rate US debt as the highest quality.

"Over more than a decade, US federal debt has risen sharply due to continuous fiscal deficits. During that time, federal spending has increased while tax cuts have reduced government revenues. As deficits and debt have grown, and interest rates have risen, interest payments on government debt have increased markedly," Moody's said.

"Like a long weekend hangover, a headache of worry is seeping into sentiment today," said Susannah Streeter, head of money and markets at Hargreaves Lansdown. "Given the pledge by Trump to cut taxes, it's feared the situation could deteriorate further. [...] The implications of Trump's erratic policymaking are causing caution to creep back in, dampening down the enthusiasm of recent weeks."

Also hitting sentiment early on were comments from Scott Bessent who warned that America could once again lift trade tariffs on some countries if they fail to meet at the negotiating table "in good faith".

His warning came after Donald Trump announced on Friday that the administration would be sending letters to some 150 trading partner countries "telling people what they will be paying to do business in the United States".

No major economic data or blue chip earnings are due for release during Monday's session, though we will see a host of Federal Reserve policymakers making speeches.

Market movers

Walmart was continuing to decline after Doug McMillon - who last week warned consumers that they would face higher prices at the till because of Trump's trade tariffs - said the retailer would try to absorb some of the impact. Trump said at the weekend that Walmart should "eat the tariffs".

Tesla was under pressure with Xiaomi expected to unveil plans later this week for a new Yu7 SUV - a model widely seen as a challenger to Tesla's Model Y.

Meanwhile, Reddit was hit by a Wells Fargo downgrade to 'equal weight', while Netflix was weighed down by a ratings cut by JPMorgan to 'neutral'.