“United States Debt Crisis: Market Review and Analysis”

2023-05-23 21:25:45

(Photo: Getty Images)

MARKET REVIEW. The New York Stock Exchange ended lower on Tuesday, as concern rises on Wall Street about the possibility of a default by the United States on its debt, against a backdrop of US monetary policy still firm.

The Toronto Stock Exchange closed with a decline of more than 200 points, undermined by losses in the industrials, information technology and telecommunications sectors.

To (re)consult market news

Stock market indices at closing

The composite index S&P/TSX of the Toronto floor returned 205.05 points to end the day with 20,146.01 points.

In New York, the average Dow Jones industrial stocks lost 231.07 points to 33,055.51 points, while the broader index S&P 500 fell 47.05 points to 4145.58 points. The composite index of Nasdaq erased 160.53 points to 12,560.25 points.

In the currency market, the Canadian dollar traded at 74.04 US cents, according to the specialized site XE.com, after recording an average price of 74.06 US cents on Friday.

On the New York Commodity Exchange, the price of oil Crude rose 86 US cents to US$72.91 a barrel, while natural gas fell 6 US cents to US$2.49 per million BTU.

The price ofor returned US$2.70 to US$1974.50 an ounce and that of copper depreciated 3 US cents to US$3.65 a pound.

The context

“It’s the first time we’ve seen real nervousness [sur le marché] related to the file of the debt , commented Steve Sosnick, of Interactive Brokers. “We are approaching [de la date limite]. We are a week or two away from a possible default by the United States.

A new meeting was held Tuesday at the White House between President Joe Biden and elected Republican congressmen, without any significant progress having been recorded.

There are only nine days left before June 1, the date from which the United States risks no longer being able to meet its commitments.

“And even if Biden and [le président républicain de la Chambre des représentants Kevin] McCarthy announce to us that they have reached an agreement, it still has to go through Congress, and it will not be cooked at all, ”warned Steve Sosnick.

The VIX index, which measures market volatility and investor anxiety, rose almost 8% on Tuesday.

As for the yield on 3-month US government bonds, it reached its highest level in 22 years, at 5.29%.

Default or not, this debt crisis is already costing the United States.

On Tuesday, the US Treasury issued Treasury bills maturing on June 15, at an average rate of 5.83%, abnormally high given that the US central bank (Fed) rate is only 5, 00% to 5.25%.

Another cloud above Wall Street, the macroeconomic indicators of the day, which “suggest that the process of disinflation will soon skate”, according to Edward Moya, of Oanda.

The S&P Global PMI activity index significantly exceeded expectations and showed that both the manufacturing and services sectors were expanding in May.

Operators only see the Fed lowering its key rate once between now and the end of the year, whereas they were anticipating three reductions just a week ago.

“I don’t think the Fed is more aggressive. It is the market that has evolved and aligned itself with the Fed,” argued Steve Sosnick.

This repositioning affected medium-term rates. The yield on 2-year US government bonds reached 4.40%, a first for two months.

The decline in the New York market was encouraged by the indices’ inability to cross major technical thresholds upwards, in particular the 4,200 points at the close for the S&P 500, which would be a first for nine months.

On the stock market, after leading the charge for most of the first five months of the year, the giant capitalizations of the technology sector have marked time. Alphabet (GOOG, -2.05% to US$123.29), Microsoft (MSFT, -1,84% à 315,26$ US), Apple (AAPL, -1.52% to US$171.56) or Nvidia (NVDA, -1.57% to US$306.88) all ended in sharp contraction.

A few representatives of the new economy escaped the storm, in particular the specialist in data analysis and artificial intelligence Palantir (PLTR, +6.76% to US$12.64), after the media fund manager Cathie Wood announced that she had bought securities from the Denver (Colorado) group.

Another survivor, the semiconductor manufacturer Broadcom (AVGO, +1.20% to US$686.50), buoyed by the announcement of a multi-billion dollar deal with Apple, to which it will supply components for 5G network connectivity.

Elsewhere, the DIY channel Lowe’s (LOW, +1.72% to US$206.65) benefited from better than expected results, even if the group lowered its annual forecast, this in order to take note of “lower than expected demand for expenditure non-essential,” said CEO Marvin Ellison.

Already well oriented on Monday, the regional bank PacWest was sought again (PACW, +7.74% to US$7.38). The course of the Californian establishment has tripled (+ 197%) since its low in early May, when it appeared as a possible victim of the banking crisis.

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