Moody’s Downgrade Cools Rally—S&P, NQ Slip After Perfect Week

E-mini S&P (June) / E-mini NQ (June)

S&P, last week’s close: Settled at 5975.50, up 42.25 on Friday and 297.50 on the week

NQ, last week’s close: Settled at 21,506.00, up 105.75 on Friday and 1,369.25 on the week

E-mini S&P and E-mini NQ futures did complete that perfect week we spoke of here Friday morning, gaining ground on all five sessions in their best week since April 7th. The E-mini S&P added 5.24%, compared to 5.5%, and the E-mini NQ added 6.8%, compared to 7.23%. It certainly was a week to celebrate, the bell had rung, traders and investors were looking at their weekend plans, but Moody’s had a different agenda, dropping a downgrade of the U.S. credit rating from AAA to AA+ at 3:45 pm CT. Markets reacted immediately, and that carried into Sunday night. Ahead of the opening bell, the E-mini S&P and E-mini NQ are down more than 1%, while both U.S. Treasuries and the Dollar are also lower. The 30-year yield is back above 5% and at the highest level since November 1, 2023. Although the downgrade is not meaningless, it is more of a formality. S&P made this downgrade in 2011, and Fitch in 2023. Moody’s cited the growing debt burden in bringing its rating in line with the other two. What the maneuver does impact is the market’s momentum just after May’s largest monthly option expiration, Friday week 3.

Fed speakers are expected throughout the day. Atlanta Fed President Bostic and NY Fed President Williams both speak this morning around 8:00 am CT and others are expected as the day unfolds.

E-mini S&P futures hit a high of 5977.50 and the E-mini NQ 21,529, both about a half percent away from the target we referenced here Friday. Furthermore, the reversal has sunk the tape below a pivotal pocket of support at 5929.75-5933.25 in the E-mini S&P and 21,247-21,278 in the E-mini NQ. For the E-mini S&P this level is now first resistance and for the E-mini NQ, it is our Pivot and point of balance. Both indices did bleed through first support overnight, but a constructive response here in the first hour will help encourage an attempt to regain resistance. We will be watching two areas of major three-star support in the E-mini S&P, the first at….