With U.S. Debt Ceiling Talks Entering Critical Phase, Investors Face Rising Risks of U.S. Debt Default

Barry Adams
24 May, 2023
New York City

Stocks struggled on Wall Street as the debt default deadline was only a week away with no measurable progress. 

Political leaders of both parties are sending mixed signals about the debt ceiling talks and negotiators are showing no real sense or urgency, indicating that a deal may be struck only in the final hours of the deadline. 

Republicans are also questioning the possible federal government default date around June 1 and several far right Republican congressmen are asking for deep cuts in federal government spending. 

For the agreement to become a bill, negotiators have to strike a deal by tomorrow, which is increasingly looking unlikely. 

President Biden has offered to freeze spending over the next two years and rescind spending COVID funds that have not been spent so far. 

Higher debt limit does not mean higher spending, the deal only increases the limit to cover the federal government spending that is already authorized by the Congress. 

 

U.S. Indexes & Yields 

The S&P 500 index decreased 0.8% to 4,114.51 and the Nasdaq Composite fell 0.8% to 12,461.55.

The yield on 2-year Treasury notes increased to 4.30%, 10-year Treasury notes edged up to 3.69% and 30-year Treasury bonds held at 3.94%. 

Crude oil rose $1.02 to $73.92 a barrel and natural gas prices rose 5 cents to $2.37 a thermal unit. 

 

U.S. Stock Movers 

Lowe's Companies declined 1.6% to 12,461.55 after the home improvement retailer reported better-than-expected sales and earnings but the company lowered its annual outlook. 

Abercrombie & Fitch Company soared 24.5% to $28.64 after the specialty apparel retailer reported higher-than-expected profit and lifted its full-year outlook. 

Kohl's Corporation soared 10.1% to $21.21 after the department store chain reported better-than-expected quarterly results. 

Sales in the first quarter declined 3.3% from a year ago $3.36 billion and net income was unchanged at $14 million and diluted earnings per share fell to 11 cents from 13 cents a year ago. 

Zoom Video Communications Inc declined for the second day in a row and fell to $64.26 after the company reported higher sales but a sharp plunge in earnings. 

Earnings in the first quarter declined to $15.44 million from $113.66 million and diluted earnings per share plunged to 5 cents from 37 cents a year ago. 

BJ's Wholesale Club Holdings Inc decreased 1.5% to $63.80 after the membership warehouse club reported weaker-than-expected sales. 

Revenue in the first quarter increased to $4.72 billion from $4.49 billion and net income increased to $116.0 million from $112.4 million and diluted earnings per share rose to 85 cents from 82 cents a year ago. 

Children's Place Inc plunged 24.7% to $17.93 after the specialty retailer reported a decline in earnings and a loss in the first quarter. 

Revenue declined 11.2% to $321.64 million from $362.35 million and the retailer swung to a net loss of $28.83 million compared to a profit of $19.83 million and diluted earnings per share was ($2.33) compared to $1.43 a year ago.