**Stocks Hold Steady Despite U.S. Credit Downgrade by Moody's**

In Monday trading, investors appeared largely unperturbed by the recent downgrade of the U.S.' credit rating, leading to a mostly stable stock market. The Dow Jones Industrial Average saw an increase of more than 130 points, or 0.32%, while the broader S&P 500 edged up by 0.09%. The tech-centric Nasdaq also posted a modest gain of 0.02%.

On late Friday, Moody's became the latest credit rating agency to downgrade U.S. debt, moving it from AAA to Aa1. Despite this, the market for U.S. government debt has shown resilience. By 4 p.m. on Monday, the yield on the 10-year Treasury note slightly rose to 4.46%, remaining below the highest point of 4.59% observed last month.

"The downgrade itself doesn't seem so far to have made much of a market splash," analysts at Capital Economics noted, adding that the market’s response to the downgrade has been relatively muted. They pointed out similar subdued reactions to earlier U.S. credit downgrades in 2011 and 2023.

While stock and bond investors seemed to weather the storm, home buyers faced less favorable conditions, with the average rate on a 30-year fixed-rate mortgage peaking at 7.04% on Monday, the highest since April 11. This uptick was attributed to the recent downgrade and weaker market conditions.

Moody's cited the U.S. government's difficulty in managing its fiscal policies as a reason for the downgrade. "Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," Moody's stated. They expressed skepticism that current fiscal proposals would yield significant long-term reductions in spending and deficits.

Despite the downgrade making international headlines, individual investors, often referred to as "retail" buyers, have continued to support the market. Evidence of this was seen in a popular investment instrument from Vanguard, which remained flat on Monday, indicating that retail traders were not eager to sell.

The U.S. remains in a precarious position regarding its fiscal health. Previous downgrades have not significantly altered the country's fiscal trajectory, and budget experts from the Congressional Budget Office and the Penn Wharton Budget Model express doubts about new spending bills under consideration.

In contrast to the market's generally positive response, JP Morgan CEO Jamie Dimon offered a cautionary perspective. Dimon warned investors that he sees a higher likelihood of stagflation—a combination of stagnation and inflation—which he believes will negatively impact corporate earnings.

The White House, however, dismissed concerns about the deficit, citing potential economic growth from the current administration's policies and ongoing government spending cuts. "In the short run, the U.S. is still the world's reserve currency and store of wealth," noted Mike Goosay from Principal Asset Management. Goosay added that the more significant concern lies in the long-term, should global investors begin to doubt the U.S.'s position in the global financial order.