Market News Today: Why Is The Stock Market Rebounding After Monday’s Moody’s Downgrade?

Major Indexes Recover Following Credit Rating Concerns

The stock market is showing signs of resilience on Tuesday, May 20, 2025, as investors appear to be shaking off concerns from Moody’s recent downgrade of U.S. sovereign credit. After Monday’s choppy session that ultimately closed in positive territory, markets are continuing to find footing despite lingering fiscal worries.

As of midday trading, the S&P 500 has gained 0.7%, building on its recent momentum that has pushed the index into positive territory for 2025 with a year-to-date gain of approximately 1.3%. The Dow Jones Industrial Average is up 0.5%, while the tech-heavy Nasdaq has climbed 0.8% after experiencing more significant pressure in Monday’s early trading.

This recovery comes despite Friday’s action by Moody’s to strip the U.S. of its last triple-A credit rating, citing concerns about large fiscal deficits and rising interest costs. The downgrade initially sent Treasury yields higher, with 30-year yields briefly touching the 5% mark on Monday for the first time since late 2023.

Home Depot Leads Today’s Earnings Releases

A slate of significant earnings reports is driving individual stock movements today. Home Depot (HD) released its Q1 2025 results before market open, with investors closely watching the home improvement retailer’s performance as an indicator of consumer spending and housing market health.

Other notable companies reporting today include PDD Holdings (PDD) and Palo Alto Networks (PANW), which will release results after market close. Toll Brothers (TOL), a luxury homebuilder, will also report after the bell, providing further insights into the housing market’s condition.

Upcoming Market Events and Economic Data

Investors are also digesting yesterday’s report from The Conference Board showing that the U.S. leading indicator fell by 1% in April, slightly worse than the consensus estimate of a 0.9% decline. This composite index, derived from 10 leading indicators, signals potential turning points in the economy and forecasts economic cycles.

Market participants are now turning their attention to several Federal Reserve officials scheduled to speak today, whose comments could provide insights into the central bank’s thinking on interest rates and inflation. The Fed has held rates steady this year amid uncertainty caused by tariffs, and according to John Williams, president of the New York Fed, the path forward might not become clearer for months.

Trade Relations and Tariff Developments

Recent positive developments on the trade front continue to bolster investor sentiment. Last week, the Dow, S&P 500, and Nasdaq posted their biggest weekly gains since early April after the White House announced a deal with China to temporarily slash tariffs.

However, trade tensions remain a concern for some sectors. European Union officials recently cut growth forecasts due to ongoing trade war concerns, while Diageo, the drinks giant behind brands like Smirnoff and Johnnie Walker, warned of a potential $150 million hit from tariffs.

What’s Driving Today’s Market Movement?

Despite fiscal concerns following the Moody’s downgrade, investors appear focused on strong corporate earnings and the temporary easing of trade tensions. Technology stocks, which led last week’s rally with the Nasdaq jumping over 7%, continue to show strength today.

Market analysts suggest that while the credit rating downgrade has raised concerns about America’s debt trajectory, strong corporate performance and the recent tariff truce with China are providing counterbalance. As one market strategist noted, “At this stage there are no signs of any serious deficit restraint,” suggesting that fiscal concerns may continue to weigh on markets in the longer term.

For investors wondering why the market is up today despite these headwinds, the answer appears to lie in the market’s forward-looking nature and its current focus on earnings strength rather than macroeconomic concerns.