Moody's downgrade triggered a drop in US stocks, with retail investors setting a record for buying on dips.

Last week, Moody's Corporation downgraded the U.S. credit rating, causing the S&P 500 index to fall by 1%. This Monday, retail traders began buying U.S. stocks in record numbers on dips. According to data compiled by Morgan Stanley quantitative and derivatives strategist Emma Wu, as of 12:30 PM Eastern Time, individual investors net bought $4.1 billion worth of U.S. stocks, the highest level at that time on that day, and for the first time on Monday afternoon exceeded the $4 billion threshold. The S&P 500 index fell by nearly 1.1% in the first few minutes of trading on Monday, but by the afternoon the index had rebounded into positive territory, and by 2:50 PM Eastern Time, the index was basically flat. Retail investors accounted for 36% of the trading volume, surpassing the end of April to reach a record high. Frank Monkam, head of macro trading at Buffalo Bayou Commodities, said, "Retail investors have learned their lesson - in the past stock market recoveries supported by put options have left retail investors behind. Retail investors have almost firmly committed that they will never make such a mistake again." This buying spree continues the trend of small investors buying U.S. stocks in large numbers for several weeks in a row. As the S&P 500 index approaches the bear market levels from April triggered by tariffs, small investors are buying stocks at a record pace. Now, with the index approaching a 20% increase and a bull market, they are enjoying the rebound process. Meanwhile, the so-called "smart money" has been watching from the sidelines. Wall Street strategists mostly ignored Moody's Corporation's downgrade and advised clients to continue buying stocks on Monday. Morgan Stanley strategist Michael Wilson said that because the easing of tensions in U.S.-China trade reduces the likelihood of an economic recession, investors should buy into the U.S. stock market decline triggered by last Friday's downgrade. Max Kettner, chief multi-asset strategist at HSBC HOLDINGS, said his team sees any drop in risk assets as an opportunity to increase exposure. Vincent Lorusso, CEO and portfolio manager at Clough Capital Partners, said, "I think retail investors are doing the right thing intuitively by allocating funds to where you can get the most attractive risk-adjusted returns. Retail investors are savvy enough to see this as an opportunity." He said that buying stocks now is justified in the background of decreasing inflation and strong balance sheets of both companies and consumers. According to data from Morgan Stanley, retail investors bought $2.5 billion in individual stocks on Monday, and $1.5 billion in exchange-traded funds (ETFs). Small investors heavily bought Tesla, Inc. and Palantir, with $675 million and $439 million flowing into these two companies, respectively. They also injected funds into Bitcoin ETFs, while still being net sellers of NVIDIA Corporation.