S&P 500 Halts Two-Day Rally on Debt-Deal Worries: Markets Wrap

(Bloomberg) -- Stocks fell amid a slide in banks and concern US lawmakers are struggling to reach a deal to prevent a default. Traders pared bets on a Federal Reserve rate hike in June as Jerome Powell signaled a pause.

The S&P 500 halted a two-day rally, failing to stay above the closely watched level of 4,200. A Republican representative said bipartisan talks in Washington are on a “pause.” When asked by reporters about new debt-ceiling meetings, House Speaker Kevin McCarthy did not answer the question.

“With the walkout of Republican debt-ceiling negotiators hindering chances for a viable conclusion before the upcoming X-date,” that would weaken chances for the Fed to raise rates on June 14,” said Quincy Krosby, chief global strategist for LPL Financial.

The $3.2 billion SPDR S&P Regional Banking exchange-traded fund slumped about over 2.5% on a news report that Treasury Secretary Janet Yellen told the chiefs of large lenders that more mergers may be needed.

Warning

Stocks are primed for a precipitous drop if the US fails to raise the debt limit and delays government payments. 

That’s the warning from a team of UBS strategists. Although it’s unlikely, if the US formally defaults and delays all payments beyond principal payments for a week, the S&P 500 will fall as much as 20% toward 3,400, the team led by Jonathan Pingle said.

“At the moment, we see reasonable odds, roughly 50%, that Congress passes a short-term extension. However given the two sides ruling that out, our assessment could be very wrong,” said the strategists.  

Corporate News

• James Gorman, who transformed Morgan Stanley after it nearly collapsed during the global financial crisis, plans to step down as chief executive officer within the next year and assume the role of executive chairman.
• Deere & Co. raised its full-year profit forecast amid strong demand for farm equipment and the easing of supply chain woes that have dogged companies since the pandemic.
• Foot Locker Inc. added more evidence that US consumers are pulling back on spending as the shoe retailer cut its annual sales forecast.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.3% as of 2:05 p.m. New York time
• The Nasdaq 100 fell 0.4%
• The Dow Jones Industrial Average fell 0.5%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.4% to $1.0817
• The British pound rose 0.4% to $1.2457
• The Japanese yen rose 0.6% to 137.81 per dollar

Cryptocurrencies

• Bitcoin rose 0.7% to $26,925.4
• Ether rose 1.3% to $1,819.44

Bonds

• The yield on 10-year Treasuries advanced two basis points to 3.67%
• Germany’s 10-year yield declined two basis points to 2.43%
• Britain’s 10-year yield advanced four basis points to 4.00%

Commodities

• West Texas Intermediate crude fell 0.8% to $71.25 a barrel
• Gold futures rose 1.3% to $2,003.70 an ounce

This story was produced with the assistance of Bloomberg Automation.

©2023 Bloomberg L.P.