U.S. stocks traded on Wednesday as investors carefully watched the outlook for the debt-limiting deal in an expected House vote later. Meanwhile, strong US employment data and China’s economic woes put pressure on global markets.
The S&P 500 (^GSPC) fell 0.81%, erasing its monthly gain on the last day of trading in May. The Dow Jones Industrial Average (^DJI) fell 0.80% or more than 260 points. The tech-heavy Nasdaq Composite (^IXIC) slid 0.80% at 12:20 p.m. ET.
US bond yields weakened as investors worried about the potential impact of the debt-limiting agreement and braced for the release of new jobs data. The yield on the benchmark 10-year Treasury fell to 3.66%. The yield on two-year bonds slipped to 4.4%, while that on 30-year bonds fell to 3.8%.
Shares lost steam as the Labor Department reported the number of job openings rose to more than 10.1 million, versus economists polled by Bloomberg who had expected 9.4 million. openings.
The figures underscore “that the tightness of the labor market is unlikely to fall off a cliff, but rather continue to fall on a bumpy path,” Oxford Economics wrote in a note on Wednesday. “While there are concerns about the veracity of the JOLTS survey due to historically low response rates, the bottom line remains that labor market strength remains robust.”
In light of recent economic data, markets are pricing in a 25 basis point interest rate hike from the Fed at the June 13-14 policymakers’ meeting. On the commodities side, the dollar index rose, while crude oil slipped below $70 a barrel.
Still, investors are still very attentive to the latest developments in Washington. The debt ceiling deal brokered by President Joe Biden and House Speaker Kevin McCarthy passed its first key test on Tuesday when it won approval from the Republican-led House Rules Committee despite opposition from hardliners. That paved the way for the deal before the House on Wednesday.
Time is running out as Congress must race to pass the deal to avoid a catastrophic default by June 5. This so-called X-Date is when the United States will run out of money to pay its bills, Treasury Secretary Janet Yellen has warned. .
Warmongering comments from Federal Reserve officials posed a headwind on Wall Street. Richmond Federal Reserve Chairman Thomas Barkin said on Tuesday he was looking for signs of slowing demand to be confident inflation would come down, at a National Association for Business Economics event.
Meanwhile, Federal Reserve Bank of Cleveland President Loretta Mester, chairwoman of the Federal Reserve Bank of Cleveland, said she sees no “compelling reason” to suspend interest rate hikes as part of of the debt limitation agreement, speaking in an interview with the Financial Times published on Wednesday.
Fed officials Patrick Harker, Susan Collins and Michelle Bowman are expected to speak publicly later on Wednesday.
Elsewhere, Chinese factory activity fell to its lowest level for a second consecutive month, another sign that its post-pandemic economic recovery is running out of steam. Asian markets fell after the data was released.
On the housing front, demand for mortgages fell to its lowest level since March, while refinancing activity also hit a new low, MBA data showed on Wednesday.
Meanwhile, in business news, Hewlett Packard Enterprise Company (HPE) fell more than 6% after the company reported a revenue loss in its second quarter results and cut its sales guidance for the full year.
Still, the surge in AI-related stocks was losing momentum, after buzz around the technology helped boost the Nasdaq 100 Index (^NDX) on Tuesday. Shares of ChargePoint Holdings, Inc. (CHPT) fell more than 1%, while C3.ai, Inc. (AI) fell more than 10% on Wednesday.
In individual stock moves, shares of SoFi Technologies, Inc. (SOFI) rose more than 11% following the debt ceiling agreement. The bill would restore government student loan repayments, benefiting the online personal finance company.
Shares of HP Inc. (HPQ) fell more than 4% after the IT giant posted better-than-expected quarterly results on Tuesday but reported sales that fell more than analysts expected .
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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