U.S. stocks opened lower on Monday after Japan’s credit downgrade. Weaker-than-expected manufacturing data out of China also weighed on investor sentiment.
Moody's Investors Service downgraded Japan's credit rating by one notch to A1 from Aa3, citing uncertainty over the country’s fiscal deficit reduction goals and growth measures after the Nikkei 225, the most widely quoted average of Japanese equities, closed at a seven-year high. The credit rating agency said the outlook for the world's third-largest economy is “stable,” reflecting the broad balance between upside risks -- including significant fiscal consolidation and a resumption of economic growth. Moody’s said Japan’s downside risks include deflationary pressures and loss in economic momentum.
Japan’s credit downgrade also comes after data on Monday revealed that China's manufacturing sector grew slower than expected last month. The final reading from the world's second-largest economy fell to a six-month low of 50.0, unchanged from a preliminary reading, according to HSBC's manufacturing PMI. A reading below 50 represents contraction in a country’s manufacturing sector. China's official purchasing managers index (PMI) fell to 50.3 last month, down from 50.8 in October.
Ahead on the economic calendar, the Institute of Supply Management is scheduled to release itsU.S. PMI for last month at 10 a.m. EST, which monitors conditions in national manufacturing to assess economic conditions. Economists expect manufacturing activity in the U.S. slipped to 58 in November from 59 in October, according to analysts polled by Reuters.
The Dow Jones Industrial Average, which measures 30 large industrial stocks, lost 44.25 points, or 0.25 percent, at 17,783.99; the S&P 500 Index fell 6.14 points, or 0.30 percent, at 2,061.42. The Nasdaq Composite declined 13.47 points, or 0.28 percent, to 4,778.16.