Good afternoon, all! Investors have plenty to digest in the week’s early going, as per usual. 

Casey has more on how the market is reacting to the US government’s credit rating downgrade — bitcoin, stocks, Treasury yields, etc.

We could also see some updates on the policy front — with Trump’s tax bill and the stablecoin-focused GENIUS Act. Here goes:

The debt trade

Assets whipsawed to start the week as investors weighed growing concerns over US debt, a new budget that looks poised to pass and, of course, ongoing trade war updates.

US equities were on the recovery path after a rocky start Monday morning. The S&P 500 was trading virtually flat at 2 pm ET after opening almost 1% lower. The Nasdaq Composite similarly had rebounded to Friday’s closing level after starting off 1.3% in the red. 

Bitcoin dipped this morning, but it had recovered some losses by the early afternoon. The largest cryptocurrency was trading just above $105,000 Monday afternoon — around 1% lower than its Sunday high.

After the close on Friday, Moody’s downgraded the US government’s triple-A credit rating to Aa1. That’s one notch lower, representing a slightly higher risk; the change is likely what had indexes in the red and Treasury yields on the rise this morning. 

Moody’s analysts attribute the downgrade to the growing fiscal deficit in the US. The move follows downgrades from other agencies: S&P Global Ratings in 2011 and Fitch Ratings in 2023. 

All three agencies have similarly cited a growing deficit and debt-interest costs. 

While the updated Moody’s rating is likely driving the increase in Treasury yields we’re seeing today, DataTrek Research co-founder Nicholas Colas warns not to put too much weight on it. 

“While the Moody’s downgrade may cause a bit of near-term equity market volatility, history shows it does not portend structurally higher interest rates, an imminent recession or declining stock prices,” Colas said.  

“Rating agencies play a critical role in capital markets, but their decisions about US sovereign debt have never signaled anything useful about future asset prices,” he added. 

The Trump administration was also unfazed, with Treasury Secretary Scott Bessent calling Moody’s a “lagging indicator” during an NBC appearance this morning. 

Meanwhile, Trump’s “big, beautiful” tax bill — which experts on both sides of the aisle agree will increase the deficit over the next decade — advanced through a key House committee over the weekend in a rare Sunday night vote. 

Speaker Mike Johnson said that “some minor modifications” have been made to appease the more budget-conscious members of the Republican Party. The bill is still under negotiation, House Budget Committee Chair Jodey Arrington told reporters last night. 

We’ll be watching this play out, but Republican leadership has said the bill could pass as soon as Thursday. 

Over in the Senate, the stablecoin-focused GENIUS Act is headed to a key procedural vote this afternoon. The bill narrowly missed passing cloture (which ends debate and allows legislation to advance) earlier this month, but Hill insiders tell us today is expected to have a different outcome. 

And, of course we’d be remiss not to mention tariffs. We didn’t see any major updates on the trade war (or any negotiations that will end it) over the weekend, but Trump is still going after Walmart for their decision to pass on higher prices to consumers. Unfortunately, it’s a move we think other retailers will soon follow should rates not come down. 

The European Commission today lowered its growth forecast for the year, citing lower exports due to US levies. Not surprising, but still disappointing for investors. 

That’s what’s going on around the market. Keep an eye on Blockworks.co tonight for an update on the GENIUS Act vote. 

— Casey Wagner

Permissionless IV will be the highest signal gathering of builders, engineers and protocol teams in the US this year.

•  Abhay Kumar (Helium) — building crypto-native wireless infra

• Alex Blania (Tools for Humanity) — scaling identity and access for the onchain world

• Uma Roy (Succinct) — making zk tooling usable

June 24–26 | Brooklyn, NY

The number of consecutive weeks we’ve seen net money flow into crypto investment products, CoinShares data shows. 

US spot bitcoin ETFs raked in about $600 million last week. That was down from ~$930 million of inflows the week before — “likely due to continued hawkish signals from the US Federal Reserve,” according to CoinShares research head James Butterfill.

Global ether product inflows increased to $205 million from May 12-16 after the Pectra upgrade. 

Happy Monday! We have a relatively quiet week ahead on the economic data front. As for policy, we’re expecting to see movement on the House tax bill and the stablecoin-focused GENIUS Act in the Senate. Both of which will pique investor interest. 

Here’s what we’re watching: 

• Initial jobless claims for the week ended May 17 will come in on Thursday. After last week’s figure came in higher than expected, a big upward surprise would be bad. Analysts are projecting 230,000 first-time filers, which would be a slight increase from the week ended May 10 (229,000). Labor market conditions will be a big factor in the timing of the Fed’s next interest rate cut, so we’re following this data closely. 

• April’s new home sales data will be released Friday. Analysts are projecting a slight decline (700,000 vs. 724,000 in March). Last week’s construction data showed that single-family new home starts were down 12% year over year in April; we expect to see that decrease reflected in new home sales in the coming months. 

• After the House Budget Committee advanced Trump’s tax bill over the weekend, Republican leadership said the legislation could pass a floor vote as soon as Thursday. The House Freedom Caucus said it’s still disappointed with the bill’s level of spending, which nonpartisan groups estimate will increase the national deficit by $3 trillion to $5 trillion by 2035. 

— Casey Wagner