The Vanguard S&P 500 ETF closed Monday at 546.82, up 0.1%, it’s sixth straight trading day of gains.
Following Moody’s downgrade of U.S. debt this morning, 30-year U.S. treasury yields passed 5% and 10-year bonds rose to 4.5%, but as the day wears on, some investors are filtering back to buy the dip, and lower bond yields accordingly. As we approach the noonday mark, 30-year T-bills have fallen below 5% (4.975% to be precise) while the 10-year Treasury is still 4.5% (but less than the 4.562% it hit earlier in the morning).
The Vanguard S&P 500 ETF is down only 0.3% now.
Taking a somewhat different view from UBS and its optimism, Northcoast Research downgraded an aerospace company (and S&P 500 component) this morning, taking GE Aerospace (NYSE: GE) down a notch to neutral.
Northcoast warns that the global trade war isn’t over just yet, and despite improved aircraft production reports, it’s not convinced the air industry is ready to boom again. With GE Aerospace shares up 36% since April, “the stock’s risk/reward is no longer appealing,” says Northcoast.
In further UBS upgrades news, the Swiss banker upgraded Archer-Daniels-Midland (NYSE: ADM) stock to buy this morning. As UBS explains, “the Budget Reconciliation bill drafted by the the House Ways and Means Committee, makes it clear that no production tax credit will be given to renewable diesel made from imported feedstocks,” potentially creating additional demand for as much as 1.3 billion gallons of domestically produced soybean oil annually.
UBS values ADM stock at $60 per share, up from $55 previously.
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Moody’s Corporation (NYSE: MCO | MCO Price Prediction) has downgraded U.S. debt from Aaa to Aa1, and investors aren’t happy about that. The Vanguard S&P 500 ETF (NYSEMKT: VOO) opened 0.9% lower on Monday, the first trading day after the credit downgrade, which was announced after close of trading Friday.
Moody’s cited risks including a growing budget deficit and rising borrowing costs in making its change. Worse, this may be a self-fulfilling prophecy. Debt markets responded to the downgrade by making U.S. debt even more expensive. 30-year U.S. treasury yields climbed past 5% and 10-year bonds rose past 4.5%.
The news isn’t entirely horrible. At Aa1, America’s debt remains “investment grade” and Moody’s fuller explanation of the new credit rating says that U.S. obligations “are judged to be of high quality and are subject to very low credit risk.” It’s still a painful cut, though, and Moody’s no longer considers U.S. debt to be “of the highest quality, with minimal risk.”
S&P Global (NYSE: SPGI) and Fitch, the world’s other two big credit raters, had previously made similar moves to downgrade U.S. debt.
Earnings season is slowing down, with only a few companies reporting this morning. ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) reported $2.45 per share this morning, beating earnings. Global Ship Lease (NYSE: GSL) likewise beat earnings with profits of $2.65 per share.
UBS upgraded both Delta Air Lines (NYSE: DAL) and United Airlines (Nasdaq: UAL) to buy. The Swiss banker called United “one of the best positioned airlines to take advantage [of] a recovery in corporate travel and continued resilience in Premium and International.” Delta is also “well placed to capitalize on any improvement.”
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Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
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