4:13pm: Fed minutes fail to lift markets
The Dow closed Wednesday down 244 points,0.7%, at 32,811, the Nasdaq Composite slid 97 points, 0.8%, to 12,463 and the S&P 500 declined 32 points, 0.2%, to 4,114. The small-cap Russell 2000 index dropped 23 points, 1.3%, to 1,765.
The benchmarks were already having a down day, and the release of the minutes from the Fed's May meeting didn't do anything to reverse that trend. Wednesday marked the fourth-consecutive losing session for the Dow.
Some members argued that the progress in reducing inflation has been “unacceptably slow” and thus more rate hikes will be necessary, while others argued that a slowdown in growth would mitigate the need to raise rates further.
Investors are also nervous about the lack of resolution regarding the debt ceiling as the US moves another day closer to default. In a press conference this morning, Republican House Speaker Kevin McCarthy said he believed the sides could make progress on negotiations Wednesday.
However, Treasury Secretary Janet Yellen previously warned that a potential default in early June is “highly likely.
12.05pm: Stocks struggle on debt ceiling worries ahead of Fed meeting minutes
US stocks were lower in noon trading ahead of the release of minutes from the Federal Reserve’s meeting earlier in May, as a possible US debt default draws nearer.
At midday, the Dow lost 266 points to 32,790, while the S&P 500 eased 36 points at 4,110 and the tech-heavy Nasdaq slipped 109 points to 12,452.
“These debt ceiling negotiations tend to resolve in a last-minute fashion with concessions by both sides,” Edward Jones senior investment strategist Mona Mahajan said.
Notable movers included shares of Palo Alto Networks Inc (NYSE:PANW), which climbed 8% after the cybersecurity company reported third-quarter financial results that topped analyst estimates.
9:35am: Sentiment sours
As US political leaders still haven’t reached an agreement on the country’s debt ceiling, concerns about the health of the Chinese and European economies saw the three major US indexes kick off Wednesday’s trading session in the red.
Just after the opening bell in New York, the Nasdaq had shed 82 points or 0.7% at 12,478 points, the S&P 500 was down 22 points or 0.5% at 4,124 points, and the Dow Jones had lost 118 points or 0.4% at 32,937 points.
City Index and FOREX.com market analyst Fawad Razaqzada noted that risk appetite had soured even further on Wednesday, with a sharp sell-off in European stock markets mirrored across the Atlantic in the US.
“Sentiment has been hurt because of various reasons, but top of the list are concerns about the health of the Chinese and European economies and fears about the US debt ceiling,” Razaqzada said.
“You also have a Fed still keen to tighten its policy further, while inflation in some parts of the world continues to remain very high, causing all sorts of problems and hurting the pockets of consumers. Businesses are not doing very well either, especially in the manufacturing sector, as we found out on Tuesday with those weak PMI numbers.”
7:55am: Looming deadline
Wall Street is likely to open slightly lower as the market prepares for the minutes from the latest meeting of the Federal Open Market Committee (FOMC), with still no resolution to the looming debt ceiling deadline on June 1.
Futures for the Dow Jones Industrial Average fell 0.3% in Wednesday pre-market trading, while those for the broader S&P 500 index slid 0.4% and contracts for the Nasdaq-100 were also down 0.4%.
The main US indexes closer lower on Tuesday as investors grew increasingly nervous over a lack of concrete updates regarding the debt ceiling talks between President Biden and House Speaker Kevin McCarthy. The DJIA closed 0.7% down at 33,056, the Nasdaq Composite fell 1.3% to 12,560 and the S&P 500 shed 1.1% to 4,146. The small-cap Russell 2000 index declined 0.2% to 1,792.
“Debt ceiling talks in the US led to some progress, but no deal was reached yesterday,” commented Swissquote Bank senior analyst Ipek Ozkardeskaya.
“The two sides are apparently close in some areas – they both want to avoid a default – but the Republicans need ‘some movement or some fundamental change’ on the White House deck. Republicans want to slash spending over as long as possible, while Democrats offer little cuts over a couple of years. But the time is ticking louder as the US Treasury’s General Account goes south at a decent pace, and the US will soon run out of money to pay its bills,” she added.
While there will be no escaping the ongoing US debt ceiling drama, Marc Ostwald, strategist at ADM Investor Services International, noted that the schedule of data and events has more to it today – including the latest minutes from the Federal Reserve’s rate-setting committee.
“As markets ponder the non-committal 'pause' signal at May's FOMC meeting, the minutes of that meeting to be published on Wednesday may offer some insight into whether a pause may be more a case of skipping a rate hike in June rather than signalling a potential peak, which again questions the wisdom of markets still discounting multiple rate cuts by year-end, despite the unwind witnessed in the past fortnight," Ostwald said.