SOTS 2nd Hour: Moody’s Downgrade Hits Stocks, “Jensanity”, and Trump Tax Bill Hang-ups 5/19/25

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Good Monday morning.

Carl Quintanilla (1:00)

Welcome to Squawk on the Street. I'm Carl Quintanilla with Courtney Reagan, David Faber here at Post 9 of the New York Stock Exchange. Sarah Eisen is on assignment. As for the market, some minimal damage here. Dows down about 70, holding on to 59.25 S&P as the long bond is backing off just a touch from 5% at 4.99. Coming up, Fundstrat's Tom Lee is going to join us with his thoughts on that Moody's downgrade from Friday that was weighing on the market. Plus Walmart didn't, the president's crosshairs after comments the CFO made on our show last week. We're going to break down what was said over the weekend.

David Faber (1:32)

But first, let's get some breaking economic data and for that we'll go to Rick Santelli. Good morning, Rick.

Rick Santelli (1:38)

Good morning, David. Yes, we're looking for our April read on leading economic indicators expected down one full percent. It's hitting the wires at down one percent. So exactly as expected and in the rear view mirror minus seven tenths of a percent becomes minus eight tenths and do keep in mind this is the 38th negative month out of the last 41 38 out of 41 are negative and minus one percent would be the most negative it's been since March of 23 We do see that interest rates are coming off their worst levels. The notion of the downgrade and of course the tax policy that's being debated is certainly drawing attention to debt and deficits. But worst case scenarios don't seem to be met as interest rates are coming down a bit. But that psychological level of five percent on a 30 year bond and four and a half percent on a 10 year and four percent on a two year are key areas to pay attention to. Carl, back to you.

Courtney Reagan (2:38)

All right, Rick, thanks so much, Rick Santelli.

Carl Quintanilla (2:40)

As Rick said, stocks under some pressure this morning after Moody's cut the US credit rating by one notch from the highest triple A to double A1 on Friday. Agency cites government debt amid these high interest rates. Atlanta Fed President Ralph L. Bostic weighed in on the downgrade this morning with our Steve Leesman. Here's what he said.

Ralph L. Bostic (2:58)

With that downgrade, it will have implications for the cost of capital and a bunch of other things. So it could have a ripple through the economy.

Carl Quintanilla (3:07)

Today's pullback comes after a standout week for the Bulls, of course, which saw the S&P jump more than 5 percent. Joining us here at Post 9 is Tom Lee, Fundstrat Global Advisors Head of Research and Fundstrat Capital CIO. Happy Monday, Tom. Good to see you in.

Tom Lee (3:19)

Yeah, happy Monday.

Carl Quintanilla (3:20)

You really haven't been unnerved by anything since Friday night, have you?

Tom Lee (3:25)

No. I don't know if there's much signal in the downgrade Friday because I think the first AAA downgrade was signal from 2011

I don't think Moody's had any information that we didn't have on Friday afternoon, so I think markets should realize the bond market largely priced in the fact that the US is really not AAA anymore. So I'd be viewing this as a buying opportunity.

Carl Quintanilla (3:47)

That said, you're not discounting the notion that the vigilantes have been reawakened a bit?

Tom Lee (3:54)

You know, I think everyone should be aware the US has an unsustainable path for debt, but I think the real signal will be when an auction fails. It happened a few years ago, and then we realized that was the time to really pay attention to the fact that we have debt sustainability issues. But I think a downgrade itself, I don't think it makes this much signal.