US stocks traded lower on Wednesday as investors kept an eye on prospects for a debt reduction deal in an expected House vote later. Meanwhile, strong US jobs data and Chinese economic woes weighed on global markets.
The S&P 500 (^GSPC) fell 0.81%, erasing its monthly gains on the last day of the May trading session. The Dow Jones Industrial Average (^DJI) fell 0.80%, or more than 260 points. The technology-heavy Nasdaq Composite (^IXIC) was down 0.80% at 12:20 PM ET.
US bond yields weakened as investors worried about the potential impact of a debt reduction deal and prepared for the release of new jobs data. The yield on the 10-year Treasury fell to 3.66%. The two-year yield fell to 4.4%, while the 30-year yield fell to 3.8%.
Stocks lost ground as the Labor Department reported that the number of job vacancies rose to more than 10.1 millionup from economists’ expectations of a 9.4 million opening.
“The malaise in the labor market is unlikely to fall off a cliff, but rather continues down a bumpy road,” Oxford Economics wrote in a note on Wednesday confirming the figures. “While there are some concerns about the validity of the JOLTS survey due to historically low response rates, the finding remains that labor market strength remains strong.”
In light of recent economic data, markets are pricing in a 25 basis point increase in interest rates from the Federal Reserve at the policy makers’ meeting on June 13-14. On the commodities side, the dollar index rose, while crude oil fell below $70 a barrel.
However, investors are still very keen on the latest developments in Washington. The debt ceiling deal negotiated by President Joe Biden and House Speaker Kevin McCarthy passed its first major test on Tuesday when it won approval from the Republican-led House Rules Committee despite hardline opposition. That paved the way for the deal to be brought before the House of Representatives on Wednesday.
The clock is ticking, as Congress must race to pass the deal to avoid a catastrophic default by June 5th. Treasury Secretary Janet Yellen warned that the so-called X-Date is when the United States runs out of money to pay its bills.
The hawkish comments from Fed officials were a headwind for Wall Street. Fed Richmond President Thomas Parkin He said on Tuesday that he is looking for signs that demand is declining to be convinced that inflation will subside, speaking at an event for the National Association for Business Economics.
Meanwhile, Cleveland Fed President Loretta Mester said she saw “no compelling reason” to pause interest rate increases amid a debt reduction deal, in an interview with the Financial Times published on Wednesday.
Fed officials Patrick Harker, Susan Collins and Michelle Bowman are expected to speak publicly later Wednesday.
Elsewhere, factory activity in China fell to its weakest level for the second month in a row, another sign that the post-pandemic economic recovery is losing steam. Asian markets fell after the data was released.
On the housing front, mortgage demand fell to its lowest level since March, while refinancing activity also fell to another low, MBA data showed on Wednesday.
Meanwhile, in corporate news, Hewlett-Packard Enterprise (HPE) sank more than 6% after the company reported a loss in revenue in its second-quarter earnings and cut its full-year sales guidance.
However, the rally in AI-related stocks is running out of steam, after hype around the technology helped boost the Nasdaq 100 (^NDX) on Tuesday. Shares of ChargePoint Holdings, Inc. fell. (CHPT) fell more than 1%, while shares of C3.ai, Inc. fell. (AI) by more than 10% on Wednesday.
In individual stock movements, shares of SoFi Technologies, Inc. rose. (SOFI) by more than 11% in the wake of the debt ceiling deal. The bill would bring back government student loan payments, benefiting the online personal finance company.
Shares of HP Inc. sank. (HPQ) fell more than 4% after the computing giant posted better-than-expected quarterly earnings on Tuesday, but reported lower sales than analysts had expected.
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Danny Romero, Yahoo Finance correspondent. Follow her on Twitter @employee
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