By Lewis Krauskopf, Shreyashi Sanyal and Shristi Achar A
(Reuters) – Wall Street’s main indexes fell on Wednesday as talks between the White House and Republican representatives on raising the debt ceiling dragged on without a deal.
Stocks held their declines after the release of minutes from the Federal Reserve’s May 2-3 meeting, showing that Fed officials “generally agreed” last month that the need for further interest rate increases “had become less certain.”
The lack of progress on raising the U.S. government’s $31.4 trillion debt limit ahead of the June 1 deadline, with several rounds of inconclusive talks, has made investors edgier as the risk of a catastrophic default looms larger.
Negotiators for Democratic President Joe Biden and top congressional Republican Kevin McCarthy reconvened for another round of discussions on Wednesday.
“Up until yesterday, investors have been very optimistic around the U.S. debt ceiling resolution,” said Angelo Kourkafas, senior investment strategist at Edward Jones. “But now as we get closer … to the June 1st X-date, we are seeing some caution again.”
The Dow Jones Industrial Average fell 224.1 points, or 0.68%, to 32,831.41, the S&P 500 lost 30.49 points, or 0.74%, to 4,115.09 and the Nasdaq Composite dropped 94.75 points, or 0.75%, to 12,465.50.
Ten of the 11 S&P 500 sectors were in negative territory, with real estate falling the most. Energy was the lone sector gainer.
The CBOE Volatility Index, known as Wall Street’s fear gauge, hovered around three-week highs.
Fed policy was also in focus, with investors expecting the central bank to pause its aggressive rate hiking campaign at its June 13-14 meeting.
Fed Governor Christopher Waller said he is concerned about the lack of progress on inflation, and while skipping an interest rate hike at the U.S. central bank’s meeting next month may be possible, an end to the hiking campaign is not likely.
(Reporting by Lewis Krauskopf in New York, Shreyashi Sanyal and Shristi Achar A in Bengaluru; Editing by Vinay Dwivedi and David Gregorio)
