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Wall St ends sharply lower on deadlocked debt ceiling talks

Published 05/23/2023, 06:15 AM
Updated 05/23/2023, 06:36 PM
© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 22, 2023.  REUTERS/Brendan McDermid

© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 22, 2023. REUTERS/Brendan McDermid

By Saeed Azhar and Shreyashi Sanyal

NEW YORK (Reuters) - Wall Street stocks finished sharply lower on Tuesday and short-term Treasury yields shot up as investor jitters grew over a lack of progress in U.S. debt limit talks.

Representatives of U.S. President Joe Biden and congressional Republicans ended another round of debt ceiling talks on Tuesday, as the deadline drew closer to raise the government's $31.4 trillion borrowing limit or risk default.

Debt limit worries pushed yields on one-month Treasury bills to record highs at 5.888%. [US/]

Investors are also waiting for minutes from the Federal Reserve's May 2-3 meeting, due on Wednesday, to assess the central bank's next likely move on interest rates.

Regional Fed Presidents James Bullard and Neel Kashkari on Monday indicated that the U.S. central bank may need to continue hiking rates if inflation remains high.

Michael Wilson, Morgan Stanley (NYSE:MS)'s equity strategist, said a U.S. debt default is not priced into the market. Even if the two sides agree on a deal, it could still have implications for economic growth, he said.

"If they come to an agreement on the debt ceiling, there will be some concessions on the fiscal spending. It's an issue for growth," Wilson said. "Is that going to be an immediate impact, or will it be later? We think there's a bit of both. At the end of the day, there's no positive tradeoff."

The S&P 500 benchmark index declined 1.12% to end at 4,145.58 points. The Nasdaq Composite fell 1.26% to 12,560.25 points, and the Dow Jones Industrial Average slid 0.69% to 33,055.51 points.

Volume on U.S. exchanges was relatively light, with 10.3 billion shares traded, compared to an average of 10.6 billion shares over the previous 20 sessions.

Strategists polled by Reuters see the S&P 500 ending the year at 4,150 points, down slightly from Monday's close of 4,192.63.

Helping limit larger losses, the S&P Global (NYSE:SPGI) data showed U.S. business activity rose to a 13-month high in May, lifted by strong growth in the services sector.

The report was the latest sign that the economy held its momentum early in the second quarter despite rising risks of a recession.

The Commerce Department's April personal consumption expenditure (PCE) index reading, the Fed's preferred inflation gauge, is due on Friday.

Broadcom (NASDAQ:AVGO) Inc advanced 1.2% after the chipmaker entered into a multi-billion-dollar deal with Apple Inc to use chips made in the United States. Apple shares (NASDAQ:AAPL) fell 1.5%.

Zoom Video Communications (NASDAQ:ZM) dropped over 8% after the video conferencing platform reported its slowest quarterly revenue growth.

Among retail earnings, Lowe's Companies Inc (NYSE:LOW) cut its annual comparable sales forecast, as demand dwindles for home improvement goods. Lowe's ended up 1.7%.

Shares of regional lenders extended gains from Monday, led by a 7.9% gain in PacWest Bancorp, with the KBW regional banking index (KRX) rising 0.9%.

© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 22, 2023.  REUTERS/Brendan McDermid

Declining stocks outnumbered rising ones within the S&P 500 by a 3.5-to-one ratio.

The S&P 500 posted three new highs and one new low; the Nasdaq recorded 90 new highs and 70 new lows.

Latest comments

Seems from the some comments that discrimination based on age has become accepted in Western society. Try to exchange old with a sex or skin color and the comment eould be deleted.
Part of retrumplicanism is that nothing is off limit.
So Biden and McCarthy stop talking to each other today??🤷‍♂️🤦‍♂️
Lol. Healthy profit taking. Tomorrow up.
Old brandon couldn't even attend.
Total polical bull chips, these people need to go.
Democrats are the worst disease America has ever faced. Hopefully we find a cure before it's too late☠️
no
Stock market nor crypto worth it with these demons playing all of us. I am done I am tired of looking up news due to a couple of old bishes manipulating everything.
goth... we'll see how green you are at the end of the year. lol
 mwa ha ha ha
anyone who calls himself gothserpent probably lives in his mommy and daddy's basement and thinks AMC is a good long term hold.
Zero times out of 78. That's the number of times the US has defaulted since 1960. This is nothing more than theater and manipulation
Yes that's right, but there's always a first time, it never had this type of situation from those 78 times, I mean with the agreement..
subdued manipulation call it. bs
What a mess. two losers who control your country's economy😀😀😀. Its very sad
Like Habeck and Lindner in Germany, I guess.
"U.S. business activity rose to a 13-month high in May," Is this part of the stagnating economy people keep talking about?
Jim: Wrong. Most recent personal savings rate is 5.3% according to data from the BEA. Get your facts straight.
Brad, the fact is you can't support for claims that the economy is this bright shiny thing. The facts show we're in for some very rough times. I'm not one to lay all the blame on Biden, while he's done his share, the truth is politicians on both sides have screwed us, the people. I'm merely saying the data shows we're headed for a recession... period.
That was Crimea, not all of Ukraine.
Of course the debt ceiling debacle hasn't been "priced in" to the laughingstock of the investing world, so it will "rally" to all-time highs if if they raise it.  All good news to expand the already egregious debt we have.  Biggest investment JOKE in the world.
Default X-day is June 1st. What’s the X-day for a deal? This Friday!?🤷‍♂️🤷‍♂️🤷‍♂️
No fear unless VIX spikes to 30+
Article on CNBC.com about Jamie Simon's view souring commercial real estate loans. Does not cover hedge funds unfortunately, only banks but 'not every bank.'
Debt ceiling will inevitably get raised, as it always does, in the end. The ruination of empires is always a slow process until it isn't.
True but the real risk is another downgrade like the one in 2011🤦‍♂️🤦‍♂️🤦‍♂️
It's 14th Amendment Time !!
Seems debt ceiling agreement is t the only solution in all US inflation, recession, bank crisis and Fed interest hike
Propaganda is supposed to offer simple explanations and solutions, affordable to brainwashed public.
It all adds up now, thanks☺
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