US stocks fell Friday after talks in Washington over raising the debt ceiling were paused.
“We’ve got to get movement by the White House and we don’t have any movement yet,” House Speaker Kevin McCarthy said.
Stocks earlier this week hit a nine-month high on hopes a debt-limit deal was in reach soon.
US stocks finished in the red Friday after negotiations in Washington over raising the US debt ceiling hit an impasse, flaring up worries the US may default on its debt for the first time ever.
Republican House Speaker Kevin McCarthy said talks with the Biden administration had reached a standstill.
“We’ve got to get movement by the White House and we don’t have any movement yet,” McCarthy said at the Capitol, according to the Associated Press. “So, yeah, we’ve got to pause.”
Stocks swung lower as investors previously expected negotiators to reach an agreement soon to increase the $31 trillion debt limit before a June 1 deadline. But the major indexes were still able to log weekly gains after the S&P 500 and the Nasdaq Composite earlier notched nine-month highs.
Here’s where US indexes stood at the 4:00 p.m. closing bell on Friday:
Treasury Secretary Janet Yellen has warned the country could run out of cash to pay bills by early June.
Jason Mountford, market trend analyst at Q.ai, told Insider in a note this week he doesn’t foresee the US defaulting on its debt. Such an unprecedented event would “cause chaos on the markets,” he said.
Stocks “would sell off dramatically, and it wouldn’t be beyond the realms of possibility to see the biggest one-day fall in history,” he said. Meanwhile, “yields would skyrocket, as US debt would all of a sudden be perceived as much higher risk than it is currently.”
Elsewhere Friday, Federal Reserve Chair Jerome Powell said with credit conditions tightening, the central bank’s policy rate “may not need to rise as much as it would have otherwise to achieve our goals.”
The prevailing Wall Street view is that the Fed will pause its rate-tightening efforts and cut rates at least twice during the second half of 2023, Sam Stovall, chief investment strategist at CFRA Research, told Insider.
“However, as a result of still-sticky inflation, concern that the Fed is not quite done has been growing, as well as the possibility that the Fed won’t start an easing cycle before 2024.”
Stovall said he sees the Fed taking its time in starting new rate reductions.
Here’s what else is happening today:
In commodities, bonds, and crypto:
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