U.S. stock futures are indicating a potential downturn as of May 2025, driven by investor apprehension regarding U.S. debt levels and the looming threat of escalating trade wars. Dow Jones Industrial Average futures have decreased by 250 points, a 0.58% drop. Similarly, S&P 500 futures have slipped by 0.6%, and Nasdaq futures have fallen by 0.61%.
The yield on the 10-year Treasury note has risen by 4.6 basis points, reaching 4.485%, following Moody's downgrade of the U.S. credit rating from AAA to Aa1 on May 16, 2025. This downgrade reflects concerns about increasing government debt and interest payment obligations. Moody's expects federal deficits to widen, reaching nearly 9% of GDP by 2035, driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation.
The dollar has weakened against the euro and yen, while gold has surged by 1.86% to $3,246.40 per ounce. Treasury Secretary Scott has cautioned about the potential reinstatement of tariffs for countries not negotiating in good faith, contributing to market unease. This situation is further compounded by concerns of an escalating trade war with China, as new US tariffs on Canada, Mexico, and China take effect, sparking fears of prolonged trade tensions. The recent market behavior reflects a broader concern that the U.S. economy could be on the brink of a downturn.