S&P500

Update on US stock market on May 20. Market holding gains without any correction

Snapshot of benchmark US stock indices on Monday: Dow +0.3%, NASDAQ +0.0%, S&P 500 +0.1%, S&P 500 at 5,963, range 5,400–6,200.

The catalyst for Monday's session was laid after Friday's close, when Moody's announced a downgrade of the US credit rating from Aaa to Aa due to the rising national debt and interest payment ratios, which are significantly higher than those of similarly rated countries.

This shocking news triggered a surge in long-term Treasury yields, a 1.0% drop in the US dollar index, and selling interest in equity futures markets. The 10-year Treasury yield, which settled at 4.44% on Friday, climbed to 4.56%, while the 30-year yield rose from 4.90% to 5.04%.

Then, selling abruptly stopped. Treasury yields reversed course, with the 10-year yield settling at 4.47% and the 30-year at 4.94%.

Stocks, in turn, benefited again from dip-buying interest and ongoing optimism about Congress potentially passing a major tax and spending bill.

The US dollar index slipped by 0.7%.

The fresh values of the benchmark stock indices didn't, by themselves, paint a strong picture, but the relative strength of the equity market stemmed from the fact that the Dow, Nasdaq, S&P 500, and Russell 2000 were down by 0.7%, 1.4%, 1.1%, and 1.5%, respectively, during the day.

Once the shock of Moody's downgrade subsided, participants concluded that it wasn't a true "surprise," considering that Standard & Poor's and Fitch Ratings had downgraded the US years earlier.

This mindset apparently supported some short-covering activity in the Treasury market, which spilled over into equities, leading the S&P 500 to log its sixth consecutive winning session.

There was little corporate news driving the trading session. JPMorgan Chase (JPM 264.94, -2.58, -1.0%) slightly raised its net interest income forecast for FY2025.

Walmart (WMT 98.14, -0.10, -0.1%) was rebuked by President Trump, who said it should "swallow the tariffs" and not raise product prices.

UnitedHealth Group's (UNH 315.89, +23.98, +8.2%) CEO and CFO jointly purchased about $30 million in stock.

JPMorgan downgraded Netflix (NFLX 1191.64, +0.11, +0.01%) from "Overweight" to "Neutral."

Seven S&P 500 sectors closed higher, led by Healthcare (+1.0%). The Consumer Staples sector followed with a modest +0.4% gain.

The Energy sector (-1.6%) was the biggest laggard—and the only one to decline by more than 0.3%. Market breadth improved throughout the session but still narrowly favored decliners on both the NYSE and Nasdaq at the closing bell.

The only report worthy of note was the Leading Economic Index for April, which fell by 1.0% (consensus: -0.7%) versus a revised -0.8% decline in March (previously -0.7%).

As for the energy market, Brent oil traded at $65.40 a barrel. Oil remained relatively stable at the beginning of the week after Trump's successful tour of the Persian Gulf countries.

Conclusion The US stock market is holding onto gains and shows no clear intention to correct just yet. However, at current price levels, it may be wise to lock in profits from dip-buying and wait for a pullback to re-enter.