The Moody’s late Friday downgrade of U.S. debt from Aaa to Aa1 will likely set a volatile tone for the coming week. This will be driven by media-fueled panic and speculative analysis from “experts” projecting worst-case scenarios. While the downgrade is a legitimate concern given the trillions of dollars in Treasuries maturing in the coming months that will now need to be refinanced at lower ratings, it’s too early to assume a crisis. Investors should remember that both Fitch Group and S&P Global had already downgraded U.S. creditworthiness in 2023 and 2011, respectively, meaning the market has largely adjusted to the reality of a non-prime U.S. credit rating. Still, fear sells, and a selloff similar to the one seen in Friday’s after-hours trading is likely as the headlines roll in.
With a light week ahead for economic data and scheduled earnings, the only potential distraction from the credit downgrade will be updates on the trade war. There is a possibility that a deal with a major trading partner could be announced to keep the momentum going after the UK agreement and the recent de-escalation with China. The Trump administration hinted that a deal could be announced once the President returns from his Middle East trip, which would be a welcome relief for markets.
A few notable names on the Watchlist are set to report earnings this week, including Baidu (NASDAQ:BIDU), which will provide insight into the Chinese economy, and enterprise software firms like Palo Alto Networks (NASDAQ:PANW), Snowflake (NYSE:SNOW), and Workday (NASDAQ:WDAY), offering a read on corporate IT spending. While these reports may provide useful data points, it might be prudent to wait for the fallout from the credit downgrade to settle before making any significant buy decisions.
Monday
Tuesday
Earnings: HD PANW
Wednesday
Earnings: BIDU SNOW
Thursday
Earnings: WDAY
Friday
Tracking This Week
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NVIDIA (NASDAQ:NVDA) is quickly approaching its Q1 earnings and has been riding a wave of positive developments, including the rollback of export restrictions and significant AI infrastructure investments in the Middle East. The AI narrative remains strong, highlighted by recent Microsoft layoffs attributed to the efficiency gains from AI, reinforcing NVIDIA’s critical role in this transformative technology. The upcoming earnings date may provide some stability against broader market pressures from the credit downgrade.
PayPal Holdings (NASDAQ:PYPL) has been largely out of favor with the market since its peak in 2021. Under new CEO Alex Chriss, the company may still appear stagnant on the surface, but there are signs of a strategic pivot. Chriss has focused on profitable growth, addressing a key weakness under previous CEO Dan Schulman. PayPal still holds valuable assets that can be leveraged for a turnaround, making this potentially a good accumulation point during the credit downgrade-induced volatility.
