© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 14, 2023. REUTERS/Brendan McDermid
By Chuck Mikolajczak
NEW YORK (Reuters) – U.S. stocks ended the trading week on a soft note on Friday as early gains faded after talks on the U.S. debt ceiling halted in Washington, dampening optimism in that an agreement could be reached in the next few days to avoid a default.
Stocks had risen in the past two sessions on growing confidence that a deal to raise the $31.4 trillion debt limit could be reached in the coming days, with the benchmark index rising more than 2%. But an initial advance on Friday was reversed by reports that talks paused as Federal Reserve Chairman 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 a deal framework… but what you’re seeing now is the Republicans saying, no, this is not acceptable, and they just went on strike.” said Quincy Krosby, chief global strategist at LPL Financial (NASDAQ:) 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 abroad. But this Friday afternoon headline is definitely not positive.”
Based on preliminary data, the S&P 500 lost 6.02 points, or 0.14%, to close at 4,192.03 points, while the Nasdaq Composite lost 30.46 points, or 0.24%, to 12,657. 90. The Dow Jones Industrial Average fell 111.03 points, or 0.33%, to 33,424.88.
The S&P 500 and Nasdaq posted their biggest weekly percentage gains since the last week of March.
The interest rate outlook remained uncertain. Powell said it is not yet clear whether additional rate increases are needed as the central bank weighs the impact of previous increases, as evidenced by recent troubles in the banking sector.
Also dampening sentiment was a CNN report that US Treasury Secretary Janet Yellen told bank CEOs on Thursday that more bank mergers may be necessary after a spate of bank failures.
Shares of regional banks, which were the first in the industry to feel the impact of the Fed’s tightening, fell, with the KBW Regional Banking index falling nearly 3% on the session. Still, the index rose nearly 6% for the week to snap a three-week losing streak, as investors judged woes in the sector largely contained for now.
Actions of Morgan Stanley (NYSE:) lost ground after CEO James Gorman announced he would step down in the next 12 months.
shoe drawer (NYSE:) Inc slumped, suffering its biggest daily percentage drop since February 25, 2022 after the shoe retailer cut its annual sales and profit forecasts.
The warning also weighed on the Dow component Nike Inc (NYSE:), and under armor Inc (NYSE:).
Foot Locker’s update wraps up a week of caution from other retailers this week, including Aim Corporation (NYSE:), house deposit Inc (NYSE:) and TJX Companies Inc (NYSE:), as consumers adjust to persistently high inflation and higher interest rates.