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Wall Street’s leading averages moved sharply lower and hit session lows on reports that debt ceiling talks stalled amid a strike by negotiators.
Markets had finished higher in the past two sessions on optimism about a move in the stagnation of the debt ceiling.
The high-tech Nasdaq Composite (COMP.IND) It was now down 0.30% to 12,650.42 points in morning trading. The benchmark S&P 500 (SP500) index was lower by 0.23% at 4,188.49 points, while the blue-chip Dow (DJI) He slipped 0.34% to 33,423.22 points.
Of S&P’s 11 sectors, seven were now trading in the red, led by Consumer Discretionary. Health and Energy led the winners.
Treasury returns were now mixed. The longer-term 10-year yield (US10Y) was flat at 3.65%, while the more rate-sensitive 2-year yield (US2Y) is now down 5 basis points to 4.22%.
“It was easy enough last week to suggest that the debt ceiling was having minimal negative impact on markets (outside of short-term Treasury bills), but this week’s more positive sentiment on the subject has moved a lot to bond markets and sent the S&P 500 and Nasdaq to the highest levels since late August, indicating that perhaps more risk was priced in than we thought,” said Jim Reid of Deutsche Bank. “The latest driving factor was comments from Republican Chairman McCarthy, who said ‘Now I can see where he can come to an agreement,’ and that the negotiators were in a ‘much better place.'”
However, reports citing multiple sources say the latest development was a walkout by Republican negotiators with talks once again at a dead end.
Friday also focused on Fed chief Powell, who was speaking at a “Monetary Policy Outlook” panel at the Thomas Laubach Research Conference. Market participants have already received comments from New York Fed President John Williams and Fed Governor Michelle Bowman.
Powell in the conference reiterated that the Fed’s monetary policy committee remains “strongly committed” to reducing inflation to 2%. The central bank chief said failure to do so would “prolong the pain” and hardship Americans experience when prices are unstable.
Dallas Fed President Lorie Logan said Thursday that she remained concerned that inflation was falling fast enough and that she may not yet be on board for a rate pause at the bank’s policy meeting. center in June.
Market expectations of a pause have been affected. According to the CME FedWatch tool, the probability of no rate change at the June meeting is now around 62%, a big drop from over 99% last Thursday. The probability of a 25 basis point cut at the July meeting has now fallen to zero from around 48% last Thursday.
In terms of active shares, luxury e-commerce company Farfetch (FTCH) rose 20% on better-than-expected sales.
Footlocker (FL) slumped on a softer quarterly report and cut guidance. Shares of Nike (NKE) and Under Armor (UA) (UAA), the companies on which Footlocker (FL) depends, were also under pressure.