On Tuesday, the Dow Jones Industrial Average fell as investors awaited a vote on the U.S. debt ceiling. The index lost 70 points, or 0.2%, while the S&P 500 remained near flat, trading above and below the flatline during the session. The Nasdaq Composite gained 0.5% but pared gains after trading up as much as 1.4% earlier in the day. The potential for a default on U.S. debt obligations raised concerns among investors during long negotiations between the White House and congressional leaders. However, President Joe Biden and House Majority Leader Kevin McCarthy reached an agreement to raise the debt ceiling and avoid default over the weekend, with Congress set to vote on the legislation as early as Wednesday.
Details of the Agreement
The proposed bill needs both Republican and Democratic support to pass, and obstacles remain on the path to passage amid growing opposition within the GOP. The agreement comes just days before the X date on Monday, which is the earliest date the Treasury Department has signaled the U.S. could default on debt obligations. The initial compromise was first announced on Saturday evening. Despite concerns, investors are confident that a deal will be reached. “Markets climb walls of worry at the end of the day, and the debt ceiling is obviously some type of worry,” said Chris Barto, investment analyst at Fort Pitt Capital. “But I think the market is kind of pricing in some sort of deal does get done.”
Interest Rate Hike Concerns
Investors are also concerned about the potential for another interest rate hike. Traders are pricing in a 68.8% chance of a Federal Reserve rate increase next month, according to the CME Group’s FedWatch tool. Richmond Fed President Tom Barkin said at a National Association of Business Economics event on Tuesday that he hasn’t “backed off” from his rate forecast, which he said is among the higher ones within the central bank. “The Fed is still a major focus for all investors,” said Brian Price, head of investment management at Commonwealth Financial Network. “It’s really a tug of war between what the Fed is likely to do: whether or not they are going to hike one or two more times, or just sit tight and wait and see how incoming inflationary data is over the next couple of months.”
The Dow Jones Industrial Average fell on Tuesday as investors awaited a vote on the U.S. debt ceiling. The S&P 500 remained near flat, while the Nasdaq Composite gained 0.5% but pared gains after trading up as much as 1.4% earlier in the day. President Joe Biden and House Majority Leader Kevin McCarthy reached an agreement to raise the debt ceiling and avoid default over the weekend, with Congress set to vote on the legislation as early as Wednesday. However, the proposed bill needs both Republican and Democratic support to pass, and obstacles remain on the path to passage amid growing opposition within the GOP. Investors are also concerned about the potential for another interest rate hike, which could impact the markets in the upcoming months.
Leave a Reply