US stocks ended lower on Tuesday as Wall Street feared the debt ceiling debate in Washington might not find a resolution.
The S&P 500 (^GSPC) ended the session down 1.12%. The Dow Jones Industrial Average (^DJI) fell 0.69%, or more than 200 points. The tech-heavy Nasdaq Composite (^IXIC) lost more than 1.26%.
For government bonds, yields fell along the curve on Tuesday, with the benchmark 10-year government bond yield slipping slightly to 3.7%. The 2-year bond yield rose to 4.34%, while the 30-year bond yield fell to 3.95%. The prolonged losses came as concerns mounted over the debt ceiling standoff and the prospect of a default loomed ever closer.
The negotiations on Tuesday initially gave hope for an agreement. This followed optimistic statements from President Biden and House Speaker Kevin McCarthy the previous day.
However, McCarthy reportedly said at a closed meeting in front of Republican colleagues that “we’re nowhere near an agreement” just hours after he said in the Oval Office, “I think at the end of the day we can.” we will find common ground.”
The back-and-forth has investors jittery in light of the countdown to “X-date” on June 1, when Treasury Secretary Janet Yellen said a default was likely to occur.
“Our baseline scenario remains that the debt ceiling is eventually raised/suspended, although the path to that target could be last-minute and could lead to significantly more market instability than the market is currently anticipating,” said Dubravko Lakos, chief strategist on US equities at JPMorgan , wrote in a note on Monday.
“We anticipate that a temporary/full-scale debt ceiling agreement will have a negative impact on federal spending and that contentious budget negotiations are likely to take place later this year,” Lakos added.
On the economy side, S&P Global’s preliminary US purchasing managers’ index (PMI), which tracks activity in both the service and manufacturing sectors, came in at 54.5 in May, up from 53.4 in April and better than that of Economists estimated the reading at 53.0, representing a 13-month increase for the index.
The story goes on
Separately, new single-family home sales rose 4.1% in April to an annualized rate of 683,000, above the revised rate of 656,000, according to a Census Bureau report. That’s still 11.8% up year-on-year and above Bloomberg consensus expectations of 665,000 units for April.
According to an open letter to Yelp’s board of directors, Yelp Inc. (YELP) shares rose more than 5% on individual stock movements as activist investor TCS Capital Management confirmed its stake in the company and urged the company to consider strategic alternatives including a sale to examine the directors on Tuesday.
Lowe’s Companies, Inc. (LOW) shares gained another 2% after the home improvement company lowered its full-year sales forecast on Tuesday, citing lower demand as high inflation weighs on consumer spending. While Apple (AAPL) said it struck a multi-billion dollar deal with chipmaker Broadcom Inc. (AVGO) to use US-made chips. Shares of the tech giant plunged more than 1%.
Elsewhere, shares of Dick’s Sporting Goods (DKS) fell after the company topped sales and earnings in the fiscal first quarter while maintaining its outlook for the year
Zoom Video Communications, Inc. (ZM) shares fell more than 7% after the video conferencing software company beat its first fiscal quarter results. The company also raised its full-year guidance.
Pfizer Inc. (PFE) shares rose after a study showed positive weight loss results in patients taking the drugmaker’s oral diabetes treatment.
BJ’s Wholesale Club Holdings, Inc. (BJ) shares fell more than 7% after the retailer reported sales that fell below analysts’ expectations. Comparable club sales ex-gasoline were lower than expected.
Meanwhile, Netflix (NFLX) is cracking down on password sharing in the US. The company announced the news in a blog post on Tuesday afternoon.
After the closing bell, Palo Alto Networks, Inc. (PANW), Intuit Inc. (INTU) and Toll Brothers, Inc. (TOL) are expected to report results.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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