U.S. stock markets closed higher on Monday after a choppy session. Market participants remained concerned regarding downgrade of the U.S. sovereign credit rating. On the other hand, positive developments on the trade and tariff related front bolstered investors’ sentiment. All three major stock indexes ended in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.3% or 137.33 points to close at 42,792.07. At intraday low, the blue-chip index was down by 307 points. Notably, 16 components of the 30-stock index ended in positive territory and 14 finished in negative zone. 

The tech-heavy Nasdaq Composite finished at 19,215.46, rising 0.02% due to strong performance of bigwigs. The major gainer of the tech-laden index was however Gilead Sciences Inc. (GILD Quick QuoteGILD - Free Report) . The stock price of the biotech firm was up 3.6%. Gilead Sciences currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 was up by 5.22 points to finish at 5,963.60. The benchmark posted a six-day winning run. Eight out of 10 broad sectors of the broad-market index ended in positive territory and three in negative zone. The Health Care Select Sector SPDR (XLV) rose 1%. On the other hand, the Energy Select Sector SPDR (XLE) fell 1.3%. 

The fear-gauge CBOE Volatility Index (VIX) was up 5.2% to 18.14. A total of 19.41 billion shares were traded on Monday, higher than the last 20-session average of 17.34 billion. Decliners outnumbered advancers on the NYSE by a 1.01-to-1 ratio. On Nasdaq, a 1.3-to-1 ratio favored declining issues.

Moody’s Downgrade U.S. 

On May 16, after the closing bell, Moody’s Investor Services downgraded the U.S. sovereign credit rating by one notch to Aa1 from Aaa citing the growing burden of financing the federal government’s outstanding budget deficit of a mammoth $36 trillion and the rising cost of rolling over existing debt under the high-interest rate regime.

According to the rating agency, "Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.” The rating agency changed its outlook on the United States to "stable" from "negative."

Following the development, the yield on the long-term U.S. 30-Year Treasury Note spiked more than 5% and the yield on the benchmark 10-Year U.S. Treasury Note climbed to 4.5%. The 10-year yield is closely link to the mortgage rate.

U.S.- China Trade Truce

After two days of high-level negotiations, the United States and China have decided to for a 90-day pause of tariff implementations. On May 12, the United States and China agreed in a discussion in Switzerland to reach a temporary agreement that “reciprocal” tariffs between both countries will be cut from 125% to 10%. Meanwhile, United States’ 20% tariffs on Chinese imports relating to fentanyl will remain intact, meaning total tariffs on China will be 30%. 

U.S. stock markets have faced massive volatility ever since President Donald Trump imposed a 10% baseline tariff on each and every country with which it trades. Tariff rates were much higher for several major trading partners of the United States.

Economic Data

The Conference Board reported that the U.S. leading indicator fell by 1% in April compared with the consensus estimate of a decline of 0.9%. The metric for March was revised downward to a drop of 0.8% from a decline of 0.7% reported earlier. The composite index of leading indicators, which is derived from 10 leading indicators, signals the turning points in the economy and forecast economic cycles.