The ABUSA trade—Anywhere But USA—was back on the table this morning, as investors digested Moody’s markdown of America’s credit rating from triple-A, coupled with the forward march of the House’s debt-expanding budget bill, and decided they didn’t like the taste.
Moody’s Friday evening downgrade sent yields on U.S. 30-year treasuries over 5%—and yields on 10-years over 4.5%. Driving home the news that this was a U.S. issue, futures of Wall Street’s three main exchanges all slumped Monday morning—with Nasdaq futures dropping 1.7% at times—while shares in Europe and Asia traded sideways or fell, but less.
The U.S. dollar slipped against the Japanese yen and the euro too.
The basic issue? While much of Wall Street and the economics establishment (not to mention Moody’s) see America’s ever-expanding debt as unsustainable, the budget bill being pushed by the Trump administration would likely add billions more.
“One thing stands out though, and that is that at this stage there are no signs of any serious deficit restraint,” said Deutsche Bank research strategist Jim Reid, the Wall Street Journal reported.
One spot of green among all the red in U.S. markets? Novavax, which jumped more than 16% on news that the FDA had approved its COVID jab, albeit with restrictions.
Here’s a snapshot of today’s action prior to the opening bell in New York:
- The S&P 500 rose 0.7% Friday. The index is up 1.3% YTD.
- S&P futures traded down 1.2% this morning, premarket.
- The Stoxx Europe 600 was down 0.7% in early trading.
- Asia was mixed: Japan was down 0.7%. China’s Shanghai exchange was up 0.1%. Korea was down and India was off 0.3%.
- Tesla, Nvidia and Palantir were all down over 3% premarket.
- Bitcoin was sitting above $103,000 this morning.
