Investors may have cheered Nokia’s first quarter results when the handset giant held on to its forecasts for mobile phone sales for the year, and seemed to signal that the mobile handset slump was bottoming out. But credit ratings agency Moody’s didn’t have the same optimistic view of the handset giant’s earnings. On Thursday, it downgraded its outlook on Nokia (NYSE: NOK) to “negative” from “stable” citing the cellphone maker’s poor Q1 earnings and gloomy forecast for the rest of the year, Reuters reports. Moody’s now rates Nokia at A1, or fifth-highest investment grade.

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Last week, Nokia reported that its first quarter sales had dropped 27 percent and that total handset sales would fall by 10 percent in 2009. Yesterday, at Nokia’s Annual General Meeting, CEO Olli-Pekka Kallasvuo said it was too early to call a market bottom. “So far it is too early to estimate whether in our sector we have seen the demand for mobile devices reaching the bottom, and when this bottom would possibly be reached,” Kallasvuo noted.

Moody’s said it was particularly worried that the slump in cellphone sales wasn’t just a result of “transitory, cyclical factors” but that the dreaded “market saturation” was to blame in most regions, and would put the brakes on the pace of revenue growth that Nokia’s been enjoying in the last few years. Such a “slow growth environment may not allow Nokia to return to credit metrics sustainable at a level that meets Moody’s expectations for a A1 rating,” the ratings agency wrote.