A renewed wave of dip buying fueled a rebound in stocks from session lows, with traders trying to look past the U.S. downgrade by Moody’s Ratings that has sent bond yields climbing and weakened the US dollar.
The S&P 500 trimmed most of a slide that earlier topped 1%.
Several strategists said any pullbabck could be an opportunity to wade back into the market amid bullish momentum fueled last week by the U.S.-China tariff truce, with some big banks watering down their recession calls.
Bonds also came well off session lows, following a slide that briefly put 30-year yields above 5%.
“We view this latest credit action as a headline risk rather than a fundamental shift for markets,” said Mark Haefele at UBS Global Wealth Management. “So while the downgrade may lean against some of the recent ‘good news’ momentum, we do not expect it to have a major direct impact on financial markets.”
Thomas Lee at Fundstrat Global Advisors sees the Moody’s downgrade as a “largely non-event,” while adding that in case of any stock weakness, he would be “buying this dip aggressively.”
“There is no “surprise” here as Moody’s is citing facts we already know, the sizable U.S. deficit,” Lee said. “And we doubt any major fixed income manager is surprised. There is simply no incremental information here.”
The S&P 500 fell 0.3%. The Nasdaq 100 slid 0.4%. The Dow Jones Industrial Average wavered.
The yield on 10-year Treasurys rose three basis points to 4.50%. The Bloomberg Dollar Spot Index fell 0.5%.
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