US equities, bitcoin par losses while yields rise on deficit fears

This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.

---

Assets whipsawed to start the week as investors weighed growing concerns over US debt, a new budget that looks poised to pass and, of course, ongoing trade war updates.

US equities were on the recovery path after a rocky start Monday morning. The S&P 500 was trading virtually flat at 2 p.m. ET after opening almost 1% lower. The Nasdaq Composite similarly had rebounded to Friday’s closing level after starting off 1.3% in the red. 

Bitcoin dipped this morning, but it had recovered some losses by the early afternoon. The largest cryptocurrency was trading just above $105,000 — around 1% lower than its Sunday high.

After the close on Friday, Moody’s downgraded the US government’s triple-A credit rating to Aa1. That’s one notch lower, representing a slightly higher risk; the change is likely what had indexes in the red and Treasury yields on the rise this morning. 

Moody’s analysts attribute the downgrade to the growing fiscal deficit in the US. The move follows downgrades from others: S&P Global Ratings in 2011 and Fitch Ratings in 2023. 

All three groups have similarly cited a growing deficit and debt-interest costs. 

While the updated Moody’s rating is likely driving the increase in Treasury yields we’re seeing today, DataTrek Research co-founder Nicholas Colas warns not to put too much weight on it. 

“While the Moody’s downgrade may cause a bit of near-term equity market volatility, history shows it does not portend structurally higher interest rates, an imminent recession or declining stock prices,” Colas said.  

“Rating agencies play a critical role in capital markets, but their decisions about US sovereign debt have never signaled anything useful about future asset prices,” he added. 

The Trump administration was also unfazed, with Treasury Secretary Scott Bessent calling Moody’s a “lagging indicator” during an NBC appearance this morning. 

Meanwhile, Trump’s “big, beautiful” tax bill — which experts on both sides of the aisle agree will increase the deficit over the next decade — advanced through a key House committee over the weekend in a rare Sunday night vote. 

Speaker Mike Johnson said that “some minor modifications” have been made to appease the more budget-conscious members of the Republican Party. The bill is still under negotiation, House Budget Committee Chair Jodey Arrington told reporters last night. 

We’ll be watching this play out, but Republican leadership has said the bill could pass as soon as Thursday. 

Over in the Senate, the stablecoin-focused GENIUS Act is headed to a key procedural vote this afternoon. The bill narrowly missed passing cloture (which ends debate and allows legislation to advance) earlier this month, but Hill insiders tell us today is expected to have a different outcome. 

And, of course we’d be remiss not to mention tariffs. We didn’t see any major updates on the trade war (or any negotiations that will end it) over the weekend, but Trump is still going after Walmart for their decision to pass on higher prices to consumers. Unfortunately, it’s a move we think other retailers will soon follow should rates not come down. 

The European Commission today lowered its growth forecast for the year, citing lower exports due to US levies. Not surprising, but still disappointing for investors. 

That’s what’s going on around the market. Keep an eye on Blockworks.co tonight for an update on the GENIUS Act vote.

---

Get the news in your inbox. Explore Blockworks newsletters:

• The Breakdown: Decoding crypto and the markets. Daily.
• 0xResearch: Alpha in your inbox. Think like an analyst.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• The Drop: Apps, games, memes and more.
• Lightspeed: All things Solana.
• Supply Shock: Bitcoin, bitcoin, bitcoin.