Moody's has downgraded the U.S. debt rating by a notch to Aa1 from Aaa. It also said the downgrade reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.

Selling pressure waned as traders seem to remain generally optimistic about the outlook for the markets. Conference Board released a report showing its reading on leading U.S. economic indicators slumped by more than expected in the month of April. The report said the leading economic index tumbled by 1% in April after sliding by a downwardly revised 0.8% in March.

Gold stocks were substantially strong, as the price of the precious metal surged in reaction to Moody's downgrade of the U.S. debt rating. Reflecting the strength in the sector, the NYSE Arca Gold Bugs Index jumped by 2.2%. Biotechnology, healthcare and brokerage stocks were strong while energy stocks moved downwards despite an increase by the price of crude oil.

Asia-Pacific stocks moved mostly lower. Japan's Nikkei 225 Index fell by 0.7% while South Korea's Kospi slid by 0.9%. Most European stocks moved upwards The German DAX Index climbed by 0.7% and the U.K.'s FTSE 100 Index rose by 0.2% although the French CAC 40 Index closed just below the unchanged line.

In the bond market, treasuries regained ground after an early slump but remained in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose 3.4 bps to 4.47% after reaching a high of 4.56%.

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