THE GIST (“THE WHAT”)
As the clock keeps ticking towards the June 1 ‘hard deadline’, investors closely monitor the ongoing debt talks. A failure to raise the debt ceiling could trigger the U.S. government default and could be catastrophic for the economy. The S&P 500 index closed a very choppy session mostly flat at 4192.63, up fractionally by 0.65 point (+0.016%).
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Debt Ceiling Deadline Likely to Whipsaw the Markets
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THE DETAILS (The “How & Why”):
The debt talks are keeping the investors on the edge with the debt ceiling deadline of June 1 approaching near. A failure to raise the debt ceiling could result into a default that could be catastrophic for the economy and spark a chaos in financial markets across the globe. Treasury Secretary Yellen reinforced her stance that the chances for a government default are a very high if the debt ceiling is not raised by mid-June.
Tech stocks held on to modest gains, pushing Nasdaq to its 13-month high despite yields moving higher. The 10-year Treasury yield settled at 3.7206%, up from 3.692% following hawkish comments by St. Louis Fed President Bullard that two more rate hikes of 25 basis points cannot be ruled out in an attempt to tame inflation.
Bucking the trend, however, Micron Technology fell 2.85% after China banned its memory chips to some of its key domestic players over security concerns, which several analysts warned is Beijing’s first target following G7’s stark criticism of China during the annual meeting of global leaders in Hiroshima.
Meta Platform Inc, Facebook’s parent company jumped 1.09% higher, rebounding from premarket losses on reports that the social media giant was charged with a whopping $1.3 billion fine by the European regulators after accusing the social media giant of misusing Europeans’ data.
Regional banks also traded higher, led by a 20% spike in PacWest Corp after the troubled lender agreed to sell $2.6 billion worth of real estate portfolio to shore up its liquidity. Pfizer was another strong gainer of the session, jumping 5.38% on reports that the drug maker’s Danuglipro weight loss pill showed promising results.