US close: Stocks lower on Fed minutes, debt ceiling unease
Wall Street closed on a low note Wednesday, as markets sank amid prolonged negotiations over the federal debt ceiling, and uncertainty sparked by the release of the Federal Reserve's recent meeting minutes.
At the close, the Dow Jones Industrial Average was down 0.77% at 32,799.92, while the S&P 500 slid 0.73% to end the session at 4,115.24.
The Nasdaq Composite, meanwhile, saw a slightly less severe drop of 0.61% to settle at 12,484.16.
Discussions over the federal debt ceiling continued with no sign of a resolution, fostering investor unease.
Adding to the uncertainty were the minutes from the latest Federal Reserve meeting, which showed disagreement among officials over the possibility of future interest rate hikes.
In the currency markets, the dollar was last down 0.01% against sterling at 80.86p, while it fell 0.02% on the euro to 93 euro cents.
The greenback similarly slipped 0.07% against the yen, to change hands at JPY 139.37.
“US markets opened sharply lower today as the prospect of a 1 June debt ceiling deal recedes further, raising the question of when the money runs out, or when a payment might get missed,” said CMC Markets chief market analyst Michael Hewson earlier.
“Tonight’s Fed minutes have almost become a footnote against the wider concerns that US politicians are engaging in a dangerous game of chicken, when it comes to the US economy.”
Fed officials divided on interest rate outlook
On the economic front, Fed policymakers showed divisions over future interest rate adjustments in the minutes from their 2-3 May meeting, released late in the session.
The minutes disclosed that “some” officials believed further policy tightening could still be “likely” to control inflation, underscoring that interest rate reductions were unlikely in the current year.
Fed staff meanwhile forecast a mild recession in their latest outlook, pointing to a contraction in bank lending as the driver of a potential downturn set to start in the fourth quarter.
They also, however, projected a moderately-paced recovery afterwards.
“These differing views, which have been echoed in public comments by both hawks and doves on the Federal Open Market Committee (FOMC) since the May meeting, reflect the ongoing internal debate over whether to pause, skip, or hike in June,” noted Mickey Levy at Berenberg.
“Chair [Jerome] Powell endorsed the notion that risks around further rate hikes have become more balanced at a 19 May Brookings Institution panel, suggesting the Fed will maintain its data-dependent tilt.
“Lingering concerns over a sharp tightening in credit conditions, and the observation from ‘some’ participants that ‘past years’ tightening was beginning to have its intended effect’, may steer the Fed toward holding the policy rate steady in June to assess how the economy and inflation evolve, before potentially hiking again later in the third quarter.”
Retailers thrive, Boeing descends on CEO’s warning
In equities, Kohl’s Corporation surged 7.52%, as the department store operator delighted investors with unexpected quarterly profits, while it maintained its full-year outlook.
Also among retailers, American Eagle Outfitters closed 4.5% higher on the back of encouraging quarterly results as well.
On the downside, Boeing dropped 1.64% after its chief executive Dave Calhoun warned the Qatar Economic Forum that the aerospace industry could face supply chain constraints for “a very long time”.
Elsewhere, PacWest Bancorp was back in focus, slipping 2.44% by the end of trading.
That was largely due to the regional bank's announcement of the sale of its property lending division to Roc360 for an undisclosed amount, as part of its broader refocusing strategy.
Reporting by Josh White for Sharecast.com.
DOW JONES INDUSTRIAL AVERAGE -255.29 (-0.77%) 32,799.92
RISERS
Salesforce Inc +1.17% $209.06
Merck & Co +0.29% $113.60
UnitedHealth Group +0.29% $480.83
Chevron Corporation +0.27% $157.27
Apple Inc +0.16% $171.84
Johnson & Johnson -0.1% $156.66
McDonald’s Corporation -0.16% $285.92
Microsoft Corporation -0.45% $313.85
Nike Inc -0.45% $108.29
Walmart Inc -0.46% $147.63
FALLERS
3M Co -3.68% $96.99
Walgreens Boots Alliance -2.56% $30.79
International Business Machines -1.95% $125.68
Travelers Companies -1.85% $175.99
Intel Corporation -1.73% $29.00
Boeing Co -1.64% $199.27
Honeywell International -1.6% $191.86
Caterpillar Inc -1.42% $209.70
Amgen Inc -1.39% $221.32
Home Depot -1.3% $291.10
S&P 500 -30.34 (-0.73%) 4,115.24
RISERS
Illumina Inc +4.05% $212.65
Netflix Inc +2.49% $364.85
Corning Inc +2.47% $31.53
Valero Energy Corporation +3.04% $114.79
EQT Corporation +1.93% $36.54
O’Reilly Automotive +1.86% $928.94
Marathon Oil +1.61% $24.02
Amazon.com Inc +1.53% $116.75
APA Corporation US +1.39% $34.38
Gartner Inc +1.31% $329.54
FALLERS
Analog Devices Inc -7.83% $173.20
Intuit Inc -7.53% $415.92
Agilent Technologies -5.95% $120.99
Dish Network Corporation -5.61% $6.23
Microchip Technology -5.15% $73.62
Boston Properties -4.94% $48.35
NXP Semiconductors -4.88% $166.52
Moderna Inc -4.47% $131.59
Epam Systems -4.44% $253.07
Digital Realty Trust -4.36% $86.49
NASDAQ COMPOSITE -76.08 (-0.61%) 12,484.16
RISERS
Palo Alto Networks +7.68% $204.31
Illumina Inc +4.05% $212.65
CrowdStrike Holdings +3.68% $149.20
Netflix Inc +2.49% $364.85
O’Reilly Automotive +1.86% $928.94
Workday Inc +1.72% $196.19
Zscaler Inc +1.66% $126.53
Amazon.com Inc +1.53% $116.75
Meta Platforms +1% $249.21
Dexcom Inc +0.9% $116.73
FALLERS
Analog Devices Inc -7.83% $173.20
Intuit Inc -7.53% $415.92
Microchip Technology -5.15% $73.62
NXP Semiconductors -4.88% $166.52
Zoom Video Communications -4.6% $62.63
Moderna Inc -4.47% $131.59
JD.com Inc -3.31% $33.88
Lululemon Athletica -2.62% $344.58
Walgreens Boots Alliance -2.56% $30.79
CSX Corporation -2.28% $30.89