US: Wall Street slips on debt ceiling uncertainty
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US STOCKS closed out the trading week on a soft note on Friday (May 19) as early gains dissipated after US debt ceiling negotiations in Washington were paused, denting optimism a deal could be reached in coming days to dodge a default.
Stocks had rallied over the past two sessions on growing confidence a deal to raise the US$31.4 trillion debt limit could be reached in coming days, with the benchmark S&P 500 climbing more than 2 per cent. But an initial advance on Friday reversed on reports of the pause in talks while Federal Reserve Chair Jerome Powell spoke at a monetary policy panel.
“The market seemed to be going into this weekend thinking that the talks were going to move towards the framework for an agreement... but what you’re seeing now is the Republicans saying, no, this is not acceptable, and they just staged a walkout,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
“It could be to put more pressure on the Democratic caucus and also take advantage of the fact that Biden is overseas. But this headline on a Friday afternoon is definitely not a positive.”
The Dow Jones Industrial Average fell 109.28 points or 0.33 per cent to 33,426.63, the S&P 500 lost 6.07 points or 0.14 per cent to 4,191.98 and the Nasdaq Composite dropped 30.94 points or 0.24 per cent to 12,657.9.
For the week, the Dow gained 0.38 per cent, the S&P 500 climbed 1.65 per cent and the Nasdaq advanced 3.04 per cent. The S&P 500 and Nasdaq notched their biggest weekly percentage gains since the final week of March.
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The interest rate outlook remained uncertain. Powell said it is still unclear if additional rate increases are needed as the central bank weighs the impact of past hikes, as evidenced by the recent troubles in the banking sector.
Also dampening sentiment was a CNN report that US Treasury Secretary Janet Yellen told bank chief executive officers on Thursday that more bank mergers may be necessary after a series of bank failures.
Shares of regional banks, which were the first in the industry to feel the impact of the Fed’s tightening policy, fell, with the KBW Regional Banking index down nearly 2.17 per cent on the session. Still, the index was up 6.2 per cent on the week to snap a three-week streak of declines as investors viewed the troubles in the sector as largely contained for now.
Shares of Morgan Stanley lost 2.66 per cent after CEO James Gorman announced he would step down from the role in the next 12 months.
Foot Locker plummeted and suffered its biggest daily percentage drop since Feb 25, 2022 after the footwear retailer cut its annual sales and profit forecasts.
The warning also weighed on Dow component Nike, down 3.46 per cent and Under Armour, which closed 4.2 per cent lower.
Foot Locker’s update wraps up a week of caution from other retailers this week, including Target, Home Depot and TJX Companies, as consumers adjust to stubbornly high inflation and higher interest rates.
Volume on US exchanges was 9.86 billion shares, compared with the 10.62 billion average for the full session over the last 20 trading days.
Declining issues outnumbered advancers on the New York Stock Exchange by a 1.36-to-1 ratio; on Nasdaq, a 1.19-to-1 ratio favoured decliners.
The S&P 500 posted 28 new 52-week highs and three new lows; the Nasdaq Composite recorded 79 new highs and 87 new lows. REUTERS
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