S&P 500 slips as debt ceiling impasse weighs

May 23, 2023 2:42 PM EDT

By Yasin Ebrahim -- The S&P 500 slipped Tuesday on growing jitters about a U.S. default after lawmakers ended another round of debt-ceiling talks without a deal.

The S&P 500 was down 1%, the Dow Jones Industrial Average slipped 0.7%, or 239 points lower, the Nasdaq fell 1.2%.

U.S. lawmakers failed to reach an agreement Monday on how to raise the U.S. government's debt ceiling after another round of talks Lowe’s Companies Inc(NYSE: LOW)Tuesday. The lack of progress comes just days ahead of June 1, when Treasury Secretary Janet Yellen warned the U.S. could default on its debt repayments.

Both Biden and McCarthy, however, have touted optimism about reaching a deal to avoid a default.

“We believe the U.S. debt default risk to be low, as both political parties have strong incentives to raise the debt ceiling, but the rekindled debate will likely increase volatility in both fixed income and equity markets,” Wells Fargo said in a note.

Tech was one of the worst performing sectors on the day, pressured by a jump in Treasury yields, with Apple Inc (NASDAQ: AAPL), Alphabet (NASDAQ: GOOGL) and Microsoft Corporation (NASDAQ: MSFT) leading to the downside.

Retailers were mostly lower, paced by a more than 2% slide in Lowe’s Companies Inc (NYSE: LOW) after the home improvement retailer reported lower first-quarter sales and cut its full-year outlook as a weaker consumer and lower lumber prices weigh.

But Dick’s Sporting Goods Inc (NYSE: DKS) bucked the trend lower after its first-quarter results topped Wall Street expectations on both the top and bottom lines.

Regional banks added to gains from a day earlier, underpinned by an 8% rise in PacWest Bancorp (NASDAQ: PACW) after the U.S. lender announced earlier this week it would sell $2.6 billion of loans to boost its finances.

Citizens Financial (NYSE: CFG), Zions Bancorporation (NASDAQ: ZION), and KeyCorp (NYSE: KEY) were also in the ascendency.

Dallas Federal Reserve President Lorie Logan on Tuesday said the central bank’s “liquidity backstop should be available whenever" banks need it.

The remarks come a day after Federal Reserve Bank of St. Louis President James Bullard said he expects two more rate hikes would be needed to stymie inflation.

Despite the hawkish remarks, about 88% of traders continue to believe that the Fed will pause in June, according to’s Fed Rate Monitor Tool.

On the economic front, services activity rose more than expected in April to a 12-month high, threatening to boost inflation.

In other news, Yelp Inc (NYSE: YELP) jumped more than 6% after activist investor TCS Capital Management reportedly took a stake in service-recommendation company and is pushing it to explore strategic options, including a sale.

Virgin Orbit, meanwhile, sold its assets in a bankruptcy auction to Rocket Lab USA, Inc. (NASDAQ: RKLB), Stratolaunch and Vast’s Launcher.

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