• Moody's downgraded the U.S. credit rating from Aaa to Aa1, impacting financial markets.
• Stocks and bonds fell sharply, with investor concerns over rising debt yields.
• Higher borrowing costs are expected to affect consumer loans and overall economic growth.
• The move signals challenges for future fiscal policy amid Congressional tax debates.
• Global markets reacted negatively, with declines noted in both stocks and the U.S. dollar.

U.S. stock futures fell significantly on Monday after Moody's downgraded the U.S. credit rating from Aaa to Aa1, marking the last of the three major credit rating agencies to issue such a downgrade. This decision, announced late Friday, prompted a sharp sell-off in stocks, with the S&P 500 futures down 1.1%, the Dow Jones Industrial Average futures down 0.6%, and the Nasdaq futures dropping by 1.5% before markets opened, according to CBS News, ABC News, and HuffPost.

Investor sentiment turned negative as the downgrade highlighted the U.S. government's rising debt, projected to reach $36 trillion. Treasury yields surged following the announcement, raising concerns about complacency in financial markets, according to analysts from Reuters and Los Angeles Times. The 10-year Treasury yield increased to around 4.52%, signaling higher borrowing costs for the U.S. government and, potentially, consumers.

Analysts predict that the downgrade could lead to increased costs for loans, affecting everything from mortgages to credit cards. "If you borrow money, your rate will go up," said Jim Bianco, a market analyst. This sentiment reflects broader concerns about how rising Treasury yields will influence borrowing costs across the economy, as indicated by ABC News and HuffPost.

The downgrade coincided with significant political activities in Washington, particularly regarding tax policy that may exacerbate the national debt. The House Republicans pushed through a domestic policy bill advocating for broad tax cuts, a move that risks further deepening the fiscal challenges ahead. This political backdrop is intricately linked to the economic concerns raised by Moody's assessment, which has sparked “Sell America” sentiments on Wall Street, according to Los Angeles Times and Reuters.