Wall Street’s main indexes erased early gains on Friday as U.S. debt ceiling talks between the White House and House Republican lawmakers were paused, dampening hopes that a deal could be reached soon to avoid a calamitous default.The indexes had opened higher on optimism that an agreement to raise the $31.4 trillion debt limit could be reached as soon as this weekend. However, news of the pause pushed the gauges lower amid nervy trading as Federal Reserve Chair Jerome Powell spoke at a monetary policy panel.
“The general tone of the progress that both sides have been making on the debt ceiling negotiation process had been a tailwind for markets and anything that changes that view likely was going to hit the market here,” said Art Hogan, chief market strategist at B Riley Wealth in Boston.”It’s not to say that this is the end of the negotiation process. It’s just a bump in the road.”Powell said on Friday that the after effects of recent banking sector troubles takes some pressure off the U.S. central bank to raise rates, while a separate report said U.S. Treasury Secretary Janet Yellen told bank CEOs on Thursday that more bank mergers may be necessary after a series of bank failures.
Powell also noted that no decisions were made yet on next the rate action.Regional banks, which bore the brunt of the stresses in the sector, fell by afternoon trading, with the KBW Regional Banking index down 3.0%. The index is still up 5.3% for the week.At 11:54 a.m. ET, the Dow Jones Industrial Average was down 97.91 points, or 0.29%, at 33,438.00, the S&P 500 was down 5.69 points, or 0.14%, at 4,192.36, and the Nasdaq Composite was down 25.65 points, or 0.20%, at 12,663.19Morgan Stanley fell 2.1% after CEO James Gorman announced he would step down from the role in the next 12 months.Foot Locker Inc plunged 27.4% after the footwear retailer cut its annual sales and profit forecasts.Its forecast weighed on Dow component Nike Inc shares which fell 3.9%, while Under Armour Inc lost 5.0%.Foot Locker’s update adds to cautious tone set by other retailers this week, including Target Corp, Home Depot Inc and TJX Companies Inc, indicating inflation- wary American consumers tightened their belts.
The benchmark S&P 500 index and the Nasdaq were set for their best weekly performance since late March amid positive debt ceiling talks, less-than-feared earnings and economic data.The S&P 500 banks index is on course to end the week 4.1% higher, snapping a three-week losing streak.Alphabet Inc added 0.5% on a report that Samsung Electronics won’t be swapping its default search engine from Google to Microsoft’s Bing any time soon.
Declining issues outnumbered advancers for a 1.43-to-1 ratio on the NYSE and for a 1.12-to-1 ratio on the Nasdaq. The S&P index recorded 28 new 52-week highs and three new lows, while the Nasdaq recorded 68 new highs and 51 new lows.