NEW YORK: Wall Street stocks fell on Tuesday (May 23) on increased worry over uncertain negotiations among Washington power brokers seeking to avoid a US debt default.
While the White House pointed to some progress in the latest round of talks with House Speaker Kevin McCarthy, markets are beginning to get more worried about the situation, analysts said.
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.
Helping limit larger losses, the S&P Global data showed US 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.
Treasury Secretary Janet Yellen has said an agreement must be reached by June 1.
“I think the realisation hit people today, that for lack of a better word, it is getting close,” said Steve Sosnick of Interactive Brokers. “This is the first time that I really think there’s been some real nervousness expressed about the debt situation.“
Even if McCarthy and US President Joe Biden can hammer out a broad deal, anything they agree to will need to be shepherded through the House of Representatives, where they face pressure from hardliners on both sides not to make too many concessions.
Michael Wilson, Morgan Stanley’s equity strategist, said a US 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,” he 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.”
Among individual companies, Broadcom advanced 1.2% after Apple announced a new multi-year multibillion dollar agreement for Broadcom to develop new 5G radio components. Apple shed 1.5%.
Lowe’s advanced 1.7% despite lowering full-year projections due to “softer-than-expected consumer demand for discretionary purchases.” – AFP, Reuters
Source: The Sun Daily
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