The S&P 500 managed to close modestly higher on Monday, rebounding from earlier losses as investors stepped in to capitalise after Moody’s downgraded the U.S. sovereign rating to Aa1. Despite concerns about a $36 trillion debt load and a looming tax-cut bill, bargain hunters contributed to this recovery.

Market Movements and Sector Insights

The Dow Jones Industrial Average increased by 137 points (0.1%), while the S&P 500 edged up by 0.1%. The Nasdaq Composite had a marginal gain of 0.02%. Defensive sectors and health care stocks showed strength, although retail giant Walmart (WMT) faced challenges after comments from President Trump regarding tariff costs.

Utilities and energy outperformed due to safe-haven flows, while financials struggled as Treasury yields rose amidst the downgrade’s aftermath.

Understanding the Moody’s Downgrade and Its Impacts

Moody’s decision stemmed from increasing debt levels and concerns over the projected long-term economic impact of proposed tax legislation. While Treasury Secretary Janet Yellen played down the downgrade as a “lagging indicator,” the effects were felt across rate-sensitive sectors.

Traders should keep a close eye on upcoming legislative events and market impacts, as changes in policy and fiscal measures will directly affect market dynamics.