[New York Stock Market] Another Decline Amid US Debt Negotiation Difficulties... Nasdaq Down 0.61%

The three major indices of the U.S. New York stock market closed lower on the 24th (local time) as the debt ceiling negotiations struggled to find a solution and the default date approached.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,799.92, down 255.59 points (0.77%) from the previous session. The large-cap S&P 500 index fell 30.34 points (0.73%) to 4,115.24, and the tech-heavy Nasdaq index dropped 76.08 points (0.61%) to 12,484.16.

All ten sectors of the S&P 500, except for energy-related stocks, showed declines. In particular, real estate stocks fell more than 2%. Financial, industrial, and materials stocks also dropped more than 1%. Apparel company Abercrombie & Fitch posted better-than-expected earnings before the market opened and closed up 31.07% from the previous session. Coles also rose more than 7% on stronger-than-expected results. Citigroup fell more than 3% after announcing plans to spin off its Mexico business through an initial public offering (IPO). Copper prices fell to their lowest level since November last year, causing related stocks such as Peabody Energy, Carpenter Technology, and Newmont Mining to decline by 1-3%. Nvidia, which reported earnings after the market closed, ended the regular session nearly flat.

[Image source=Reuters Yonhap News]

Investors monitored political discussions on raising the debt ceiling, corporate earnings, and the Federal Reserve's release of the May Federal Open Market Committee (FOMC) minutes amid warnings that a default could occur as early as June 1.

Although working-level negotiation teams from both sides have continued discussions daily, no solution has been found, increasing concerns about default. Republican House Speaker Kevin McCarthy said at a press conference, "We are still far apart. We know where the differences lie," adding, "I hope we make progress today." On the same day, he appeared on CNN and maintained the Republican stance that large government spending cuts are a prerequisite for raising the debt ceiling, saying, "We need to cut spending more than last year." When asked how much more needs to be cut, he replied, "That is part of the negotiation. The Democrats want to spend more, not less," blaming the Democrats.

U.S. Treasury Secretary Janet Yellen attended a Wall Street Journal (WSJ) forum and reiterated the warning of default, saying, "It seems almost certain that we will not get past early June." This came amid recent speculation that spending adjustments could allow the government to hold out until mid-June, but Yellen again set the deadline as early June. She did not provide specific answers regarding payment prioritization and confirmed that the Treasury is not making separate preparations for investors in case of default.

Adam Sarhan, CEO of 50 Park Investments, said, "When fear strikes, investors tend to sell first and ask questions later," describing the market mood. Mona Mahajan of Edward Jones expressed hope for an agreement, saying, "These debt ceiling negotiations tend to be resolved at the last minute with concessions from both sides." However, she added, "There will be frustration and political theater during the process leading to the final agreement." While the market believes the worst-case scenario of default will not materialize, it is concerned about the uncertainty and repercussions leading up to it. As caution around the debt ceiling negotiations rises, the Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," surged more than 8% from the previous session, surpassing the 20 level for the first time since May.

The May FOMC minutes released in the afternoon showed that Fed officials who unanimously raised the benchmark interest rate earlier this month were divided on whether to raise rates further or hold steady in June. However, more participants appeared to favor a "hold." CNBC noted that, based on typical Fed language, "several" is considered more than "some," indicating that more officials support the rate-hold scenario. They also left open the "option" for additional rate hikes even if rates are held steady. The minutes stated, "Many participants expressed high uncertainty about how much additional tightening would be appropriate" and emphasized the need to keep options open for future meetings.

Currently, the market largely expects a rate hold in June. According to the CME FedWatch tool, the federal funds futures market reflected about a 65% probability of a rate hold in June, with the probability of an additional baby step hike around 34%. Economic data releases scheduled for later this week include the April Personal Consumption Expenditures (PCE) price index (on the 26th) and the revised first-quarter GDP growth rate (on the 25th). The April core PCE is expected to rise 4.5% year-over-year and 0.3% month-over-month.

Fed Governor Christopher Waller said, "We need to maintain flexibility to make the best decision in June," noting that indicators released over the next three weeks will be crucial. However, he added, "I do not expect the data we receive over the next few months to clearly indicate that we have reached the terminal rate," suggesting the possibility of further rate hikes.

In the New York bond market, Treasury yields rose. The 10-year U.S. Treasury yield stood around 3.74%, and the 2-year Treasury yield, sensitive to monetary policy, was around 4.38%. The dollar index, which measures the value of the dollar against six major currencies, rose more than 0.3% to 103.8.

International oil prices rose for the third consecutive trading day on inventory decline news. On the New York Mercantile Exchange, July West Texas Intermediate (WTI) crude oil closed at $74.34 per barrel, up $1.43 (1.96%) from the previous session.

This content was produced with the assistance of AI translation services.