US stocks: Wall Street ends sharply lower on deadlocked debt ceiling talks


NEW YORK — Wall Street stocks ended Tuesday sharply lower and short-dated Treasury yields soared as investors grew nervous about a lack of progress in US debt limit negotiations.
Representatives from U.S. President Joe Biden and Congressional Republicans on Tuesday ended another round of debt ceiling negotiations as the deadline for raising the government’s $31.4 trillion borrowing limit or risking a default drew nearer.
Debt ceiling concerns pushed 1-month government bond yields to a record high of 5.888%.
Investors are also awaiting the minutes of Wednesday’s May 2-3 Federal Reserve meeting to gauge the next likely rate move from the central bank.
Regional Fed Chairs James Bullard and Neel Kashkari on Monday hinted that the Federal Reserve may have to raise interest rates further if inflation remains high.
Michael Wilson, equity strategist at Morgan Stanley, said a US debt default was not priced into the market. Even if both sides reach an agreement, it could still have an impact on economic growth, he said.
“If they agree on the debt ceiling, there will be some concessions on government spending. It’s a growth issue,” Wilson said. “Will that have an immediate impact or will it be later? We think it’s a bit of both. At the end of the day there is no positive compromise.”
The leading index S&P 500 lost 1.12% and closed at 4,145.58 points. The Nasdaq Composite fell 1.26% to 12,560.25 points and the Dow Jones Industrial Average slipped 0.69% to 33,055.51 points.
Volume on US exchanges was relatively light at 10.3 billion shares traded, compared to an average of 10.6 billion shares over the past 20 sessions.
Strategists polled by Reuters expect the S&P 500 to end the year at 4,150 points, down slightly from Monday’s close of 4,192.63.
In a bid to limit larger losses, data from S&P Global showed that US business activity rose to a 13-month high in May, on the back of strong growth in the services sector.
The report was the latest sign that the economy maintained momentum at the start of the second quarter despite mounting recessionary risks.
The Commerce Department’s April Personal Consumption Expenditures (PCE) Index, the Fed’s preferred indicator of inflation, is expected on Friday.
Broadcom Inc rose 1.2% after the chipmaker struck a multibillion-dollar deal with Apple Inc to use US-made chips. Apple shares fell 1.5%.
Zoom Video Communications fell over 8% after the video conferencing platform reported its slowest quarterly revenue growth.
As for retail earnings, Lowe’s Companies Inc lowered its guidance for full-year comparable sales as demand for home improvement items slowed. Lowe’s closed up 1.7%.
Regional lenders’ shares continued gains from Monday, led by a 7.9% gain in PacWest Bancorp, with the KBW regional bank index rising 0.9%.
In the S&P 500, declining stocks outperformed rising stocks by a ratio of 3.5 to one.
The S&P 500 posted three new highs and one new low; The Nasdaq recorded 90 new highs and 70 new lows.

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