By Stan Choe. Media: AP News.
NEW YORK (AP) — Wall Street is slipping Tuesday as the U.S. government creeps closer to the edge of a potentially disastrous default on its debt.
The S&P 500 was 0.6% lower in its first trading after President Joe Biden and House Speaker Kevin McCarthy closed a meeting late Monday that they called productive but ultimately ended with no deal.
The Dow Jones Industrial Average was down 56 points, or 0.2%, at 33,225, as of 1:03 p.m. Eastern time, while the Nasdaq composite was 0.7% lower.
Washington is facing a deadline as early as June 1, when the U.S. government could run out of cash to pay its bills unless Congress allows it to borrow more. Economists and investors widely believe a default would send shockwaves through the global economy and financial markets.
The stock market has remained resilient despite the concerns, largely because this scenario has played out many times before with Congress ultimately agreeing to a deal. The alternative simply seems too dire for anyone to allow.
But a worry on Wall Street is that Washington may not feel urgency to act until financial markets shake hard enough to show the stakes for politicians.
Some areas are showing more concerns, particularly in the bond market where some Treasury bills are supposed to get repaid around the date of a possible default. Prices for those bonds have fallen, in part because of the debt-ceiling worries, which in turn has pushed up their yields.
The worries about the debt ceiling are coming on top of concerns that the slowing economy may already be heading for a recession. A preliminary report released Tuesday morning suggested the economy remains split, with manufacturing remaining under pressure while growth for travel and other service businesses is strengthening.
“The US economic expansion gathered further momentum in May, but an increasing dichotomy is evident,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
On Wall Street, electric vehicle maker Lordstown Motors fell 5.9% to 28 cents after it announced a reverse stock split in order to boost its share price. Investors will get one new share for every 15 they currently hold. Its stock has remained below $1 since mid-March.
On the winning side of Wall Street was Lowe’s, which rose 1.7% after reporting stronger profit and revenue for the latest quarter than analysts expected. But it also cut its financial forecasts for the year partly because of lower-than-expected sales to do-it-yourself customers.
Last week, rival Home Depot projected its first decline in annual revenue since 2009 in the aftermath of the housing market crash and financial crisis.
Retailers are among the last companies to report their results for the first three months of the year, and most companies have been beating expectations. Retailers in particular have gotten lots of attention because resilient spending by U.S. households has been one of the main positives keeping the economy out of a recession.
Manufacturing and other areas of the economy are struggling under the weight of much higher interest rates meant to get inflation under control.
High interest rates have also meant stress for the U.S. banking system. Three high-profile bank failures since March have rattled the system, and Wall Street has been on the hunt for the next bank that could suffer a debilitating drop in confidence by its customers.
Some of the heaviest scrutiny has been on PacWest Bancorp, but it’s rallying for a second day after announcing the sale of a $2.6 billion portfolio of real-estate construction loans. It’s up another 13.4% after jumping 19.5% Monday.
Other banks also rallied, including a 5.7% jump for Zions Bancorp. and a 4.9% climb for Comerica.
Also helping to limit losses for Wall Street were energy stocks, which climbed with the price of crude oil. Exxon Mobil gained 2.7%, and Chevron rose 3.2%.
In the bond market, the 10-year Treasury yield ticked up to 3.73% from 3.72% late Monday. It helps set rates for mortgages and other important loans.
The two-year yield, which moves more on expectations for the Fed, rose to 4.37% from 4.32%.
Most stock markets abroad fell, including a 1.3% drop for Hong Kong and a 1.5% slide for Shanghai.
AP Business Writers Matt Ott and Joe McDonald contributed.