U.S. stocks opened lower Tuesday as the debt ceiling negotiations in Congress and the specter of a market-shaking default cast a pall on trading.
How stocks are trading
- The S&P 500 dropped 14 points, or 0.3%, to 4,177
- The Dow Jones Industrial Average fell 105 points, or 0.3%, to 33,181
- The Nasdaq Composite dropped 43 points, or 0.3%, to 12,677
On Monday, the Dow Jones Industrial Average DJIA,
What’s driving markets
Tuesday’s session is starting on a downbeat note, following President Joe Biden and House Speaker Kevin McCarthy’s Monday talks after the market close. There was no deal, but Biden and McCarthy struck a somewhat upbeat tone. More talks are planned.
On Monday, Treasury Secretary Janet Yellen reiterated that the U.S. won’t be able to pay all its bills by early June, and as soon as June 1, if Congress doesn’t raise the debt ceiling. One think tank’s projections Tuesday said the “X-Date” could arrive on June 2.
“The debt ceiling seems to be the only market driver,” said Stephen Innes, managing partner at SPI Asset Management.
Stresses have been building in government bond markets, pushing up short-term yields and the price of debt insurance, as traders express concern about the impact on markets should Yellen’s feared scenario come to pass.
“If no agreement is reached, the U.S. could default on interest it owes on its debts, sending borrowing costs soaring and sending shockwaves through the global economy. The forecast incoming mild recession would turn into a storm and the U.S. financial credibility would be badly shaken,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The uncertainty has encouraged investors to eschew bold bets of late. The S&P 500 is up 9.2% this year as traders welcomed easing banking sector angst, inflation cooling to a two-year low, and a generally well-received first quarter earnings reporting season.
But after reaching the top of its 3,800 to 4,200 range held for about seven months, the S&P 500 is struggling to make further headway until the prospect of a technical default by the U.S. government is removed.
“Ongoing debt ceiling negotiations left investors sitting on their hands and unwilling to commit in the absence of an agreed resolution,” said Richard Hunter, head of markets at Interactive Investor.
U.S. economic updates set for release on Tuesday include S&P Global flash U.S. services and manufacturing purchasing manager indices for May, due at 9:45 a.m. Eastern. Before that at 9 a.m. Dallas Fed President Lorie Logan is expected to deliver comments.
Companies in focus
- Lowe’s Companies Inc. LOW,
+2.35% shares are up more than 1% Tuesday after the home-improvement retailer beat fiscal first-quarter profit and sales expectations but cut its full-year outlook, citing lower demand for discretionary items. - Yelp Inc. shares YELP,
+9.10% surged over 11% after the Wall Street Journal reported an activist investor is calling on the company to consider selling to boost its value. - RenaissanceRe Holdings Ltd. RNR,
+3.57% shares are up more than 3% in the extended session Monday after the reinsurer said late Monday it has agreed to buy American International Group Inc.’s AIG,+4.14% AIG’s reinsurance businesses, which includes Validus Reinsurance Ltd. and subsidiaries as well as managed funds, for $2.985 billion. - Zoom Video Communications Inc.’s stock ZM,
-7.13% slipped 7% even as the videoconferencing company topped Wall Street expectations across the board on results and forecasts.
