US stocks end higher, shrugging off Moody's downgrade
A television broadcasts Moody's US credit downgrade news on the floor of the New York Stock Exchange on May 19. PHOTO: BLOOMBERG
NEW YORK - Wall Street stocks edged higher on May 19 after shrugging off a spike in US Treasury bond yields following Moody's downgrade of the US credit rating.
But yields subsequently eased as markets concluded Moody's analysis contained no surprises.
After the knee-jerk reaction, 'the market settles down and focuses on the economic fundamentals,' said Ms Subadra Rajappa, head of US rates strategy at Societe Generale.
The downgrade reflects serious concerns about the US' fiscal picture, but they were well known prior to the Moody's downgrade, Ms Rajappa said.
The Dow Jones Industrial Average finished up 0.3 per cent at 42,792.07.
The broad-based S&P 500 edged up 0.1 per cent to 5,963.60, while the tech-rich Nasdaq Composite Index added less than 0.1 per cent at 19,215.46.
May 19's session was the first since Moody's on May 16 announced the downgrade, citing rising levels of US government debt and interest payment ratios 'to levels that are significantly higher than similarly rated sovereigns.'
On May 19, the yields on 10- and 30-year US bond surged above the levels in early April when President Donald Trump's aggressive tariff announcements sent markets spiraling.
But in comparison with that turbulent period, a closely-watched volatility index remained relatively stable. Stocks have rallied since Mr Trump suspended many of his most onerous tariff measures.
Still, JPMorgan Chief Executive Jamie Dimon during an investor day characterised the remaining levies as 'pretty extreme tariffs,' suggesting stocks are overvalued in light of lingering risks.
'I think that's an extraordinary amount of complacency,' Mr Dimon said of overall market sentiment.
Among individual companies, Regeneron Pharmaceuticals rose 0.4 per cent after announcing it will buy genetic testing company 23andMe out of bankruptcy for US$256 million (S$333 million), a deal that provides the US biotech company with data on millions of clients.
Novavax soared 15 per cent after US health regulators gave final approval to Novavax's Covid-19 vaccine after an unusual delay. The drug has been approved for use in only two categories of patients: people aged 65 years and up, and those aged 12 to 64 who have at least one underlying health condition that puts them at high risk from Covid-19. AFP
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