(New York) The New York Stock Exchange is moving down Tuesday pending negotiations at the White House on the debt ceiling of the United States between the Democratic administration and the Republicans.
After an anemic session the day before, the Dow Jones index yielded 0.04%, the NASDAQ dropped 0.57% and the broader S&P 500 index -0.39% around 10:15 a.m. (Eastern time).
The day before, Wall Street had stood still during a numb session, while London remained closed.
The tussle over raising America’s ability to borrow is gaining momentum with a summit meeting between President Joe Biden and congressional leaders at 4 p.m. EST at the White House.
With Congress having the prerogative to authorize increasing sovereign debt, Republicans refuse to do so without drastic spending cuts while Joe Biden, so far, has refused to negotiate.
At stake is a possible default by the United States if after the 1er June, for want of being able to borrow again, the country can no longer honor its financial commitments. The public debt of the world’s largest economy amounts to more than 31,000 billion dollars.
“Clearly, the gap is huge between the position of the president and that of the Republicans”, admitted Janet Yellen, the secretary of the Treasury on Monday while reiterating that a default in payment by the United States, which would be a first in the history, would lead to “chaos”.
For Art Hogan of B. Riley Wealth Management, “it is unlikely that the meeting” at the White House “will generate major breakthroughs”.
“But history suggests that the stalemate will lead to an agreement […] and the most likely scenario is that Congress will pass an extension until September 30, when the fiscal year ends,” the analyst predicted.
Other issues are of concern to investors, including China’s economic outlook.
China’s trade balance figures showed a decline in exports and above all a decline in imports in April over one year (-7.9%).
“This weakening in April raises the question of the strength of the reopening of the Chinese economy after the easing of restrictions related to COVID-19”, worried Patrick O’Hare of Briefing.com.
The health of US banks remained in the sights of investors while regional institutions like PacWest (-7% around 10 a.m. Eastern time) or Western Alliance (-7.47%) started to fall again.
“The banking system is healthy and resilient,” Fed Governor Philip Jefferson said on Tuesday.
Finally, investors were cautious ahead of Wednesday’s publication of US inflation (CPI index), which could have been tenacious again in April, due to a rise in energy prices.
On the stock market, Boeing gained almost 3% after having won an order for 300 new Boeing 737-MAX-10, including 150 firm and 150 optional, for a list price “estimated at more than 40 billion dollars” from the Irish company Ryan Air.
Rupert Murdoch’s Fox Corporation media group climbed 1.43%. Its quarterly results were better than expected, with revenue climbing 18% to $4.08 billion, including +43% for advertising revenue alone.
Data analytics firm Palantir soared 18% after announcing better-than-expected quarterly results as management reported ‘unprecedented demand’ for its insights which should benefit from future support from the artificial intelligence.
Its quarterly revenue was $525 million (+18%), more than half of which came from government contracts.
Electric vehicle maker Lucid lost 6.60% as sales fell from the previous quarter. Rivian yielded 3.67% and Tesla 2.20%.