Stocks tumbled due to a side trader of the US debt crisis: markets wrapping

(Bloomberg) — Equity traders have remained mostly sidelined just hours away from resuming Washington talks on raising the debt ceiling and preventing a historic default.

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It was another lackluster session for the stock market, with the S&P 500 falling for the third time in four days and approaching the 4,100 level. After cutting its forecasts, in a sign that economic uncertainty is leading to a decline in spending on home improvement. Big tech has outdone again.

The bond market was under pressure with Pfizer launching a potentially massive debt deal. Yields have risen about four basis points across the US curve, with the 30-year bond rate hitting its highest level since unrest erupted in the banking industry in early March.

Treasury Secretary Janet Yellen warned that “time is running out” to avert economic disaster from failing to raise the debt ceiling, speaking ahead of a meeting Tuesday between President Joe Biden and congressional leaders. On Tuesday morning, House Speaker Kevin McCarthy said there was “no progress” in the talks overnight before the 3 p.m. meeting.

“US lawmakers failed to agree on increasing the debt limit, which is already starting to distort some markets,” said Seema Shah, chief global strategist at Principal Asset Management. “Since both sides know what is at stake, default is unlikely. However, each day that approaches the June 1 Treasury deadline without a decision is likely to increase volatility in the markets, and dampen demand for American risky assets, even precipitating a recession.”

Read: ‘Recession’ creeps across retail: Watch

Cleveland Fed President Loretta Mester said the central bank can’t do much about slowing long-term economic growth, but it can “do its part” by curbing inflation. Her counterpart in Richmond, Thomas Parkin, said he was still looking forward to being convinced that inflation had been defeated and was willing to raise interest rates further if necessary.

US retail sales rose in April, indicating that consumer spending is holding up in the face of economic headwinds including inflation and rising borrowing costs.

“There is nothing in this series that will undo a June rate hike – although we suspect one will come to fruition,” said Ian Lingen of BMO Capital Markets. “Instead, the Fed will err on the side of holding the station as long as possible as economic headwinds continue to build but remain contained for now.”

The mood among global fund managers deteriorated in May, as investors poured into cash amid fears a recession and credit crunch loomed, according to the latest Bank of America survey.

The BofA poll showed that sentiment among fund managers has deteriorated to the most bearish this year, with 65% of respondents now expecting a weaker economy. At the same time, nearly two-thirds of investors see a soft landing as the most likely scenario for global economic growth and expect only a small contraction in profits.

Main events this week:

  • Eurozone CPI, Wednesday

  • Bank of England Governor Andrew Bailey delivers a keynote address on Wednesday

  • Residences begin in the US, Wednesday

  • US Initial Jobless Claims, Conference Board’s leading indicator, Existing Home Sales, Thursday

  • Japanese CPI, Friday

  • European Central Bank President Christine Lagarde takes part in a panel discussion at the Central Bank of Brazil conference, Friday

  • John Williams of the Federal Reserve Bank of New York speaks at a monetary policy research conference in Washington. Federal Reserve Chairman Jerome Powell and former Chairman Ben Bernanke to participate in a panel discussion on Friday

Some of the major movements in the markets:


  • The S&P 500 is down 0.3% as of 11:15 a.m. New York time.

  • The Nasdaq 100 rose 0.4%.

  • The Dow Jones Industrial Average fell 0.7%.

  • The Stoxx Europe 600 fell 0.4%.

  • MSCI World Index fell 0.3%


  • The Bloomberg Spot Dollar Index rose 0.2%.

  • The euro fell 0.1 percent to $1.0858

  • The British pound fell 0.4 percent to $1.2485

  • The Japanese yen fell 0.3 percent to 136.56 per dollar

Digital currencies

  • Bitcoin fell 1.2% to $27,023.07

  • Ether fell 0.4% to $1,818.86


  • The yield on the 10-year Treasury note advanced six basis points to 3.56%.

  • Germany’s 10-year yield advanced three basis points to 2.34%.

  • The UK 10-year yield was little changed at 3.81%.


  • West Texas Intermediate crude fell 0.6% to $70.66 a barrel

  • Gold futures fell 0.9 percent to $2,004.20 an ounce

This story was produced with help from Bloomberg Automation.

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