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Home » Dow Jones falls more than 3% in May: jitters ahead of debt ceiling vote

Dow Jones falls more than 3% in May: jitters ahead of debt ceiling vote

The DOW JONES falls 0.42% to 32,903 points, while the S&P 500 falls 0.46% to 4,186 points. The NASDAQ 100 fell 0.34% to 12,975 points.

Today’s declines follow a dull day of trading on Tuesday, when the Dow shed about 50 points, while the Nasdaq Composite rose 0.3% and the S&P 500 was broadly flat.

On the last trading day in May The Nasdaq Composite is up nearly 6.5% for the month. The S&P 500 is up just 0.9% while the Dow Jones is down 3.1%..

The outperformance of the tech-heavy Nasdaq is due in large part to the artificial intelligence frenzy that briefly boosted NVIDIA’s market cap to over $1 trillion yesterday. However, many on Wall Street worry that market strength is limited to a few large stocks.

“We don’t see any signs of broad participation. “We don’t see any signs of early-cycle companies using AI,” said Andrew Smith, chief investment strategist at Delos Capital Advisors in Dallas.

One factor that has weighed on the market in recent weeks is the debt ceiling dispute. President Joe Biden and Speaker of the House Kevin McCarthy announced an agreement over the weekend limit basic federal spending for two years and raise the debt ceilingbut the agreement has not yet been ratified.

The Fiscal Responsibility Act cleared a key hurdle in committee on Tuesday and, according to the House of Representatives’ preliminary voting schedule, is expected to be voted on Wednesday night in the House of Representatives plenary session. In principle, she has enough votes to get ahead.

The bill later goes to the Senate, where some lawmakers from both parties have threatened to table amendments that could delay approval, given June 5 is the deadline by which the US could default.

“It seems that the political ‘drama’ will last until the end,” he muses Juan J. Fernández-Figares, of Link Management. The expert also reminds that after the passage of the law, “the US Treasury will have to issue a huge volume of debt – estimated at almost $1 trillion – to meet outstanding payments, a fact that could be possible.” Withdraw liquidity from the stock markets and even cause a significant transfer of funds from these markets into the new government bonds.”

In the corporate space, investors today have to digest the financial statements released by HP last night. Shares of the tech hardware company are down more than 5% at open time after a mixed report in the fiscal second quarter. HP reported adjusted earnings per share of 80 cents, 4 cents above estimates. However, revenue of $12.91 billion was below the $13.07 billion forecast by analysts.

Heavier is the penalty for Ambarella, which collapses by 18%. The chipmaker has provided revenue guidance of between $60 million and $64 million for the second quarter, down from the $67.2 million expected by analysts. The decline came despite Ambarella reporting a lower-than-expected adjusted loss in the first quarter.

Ambarella, like many other chip stocks, has rallied in recent weeks as investors get excited by demand for semiconductors amid advances in artificial intelligence. However, Today’s decline threatens to erase more than half of May’s gains.

American Airlines is up about 2% after raising its expectations for the second quarter. The airline expects earnings per share of between $1.20 and $1.40 and $1.45 and $1.65. Margin expectations have also been raised from 11% to 13% to a range between 12.5% ​​and 14.5%.

The results show that Twilio rose 3.6% after it was announced that Legion Partners is considering changes to the automated communications company’s board of directors and divestitures.

In fixed income, investors are also focused on the vote on the debt ceiling, with the 10-year yield falling four percentage points to 3.654%. For two-year paper, the yield falls three points to 4.436%.

On the commodity markets, oil prices fell again this Wednesday. Poor Chinese PMI data is fueling renewed investor fears of weak demand ahead of this weekend’s OPEC+ meeting. U.S. oil futures fell 1.60% to $68.11, while benchmark European Brent crude fell 1.25% to $72.55 a barrel.

Both benchmarks come off a more than 4% decline yesterday. The July contract for Brent, which expires Wednesday, and West Texas are on track, posting monthly declines of more than 9% and 11%, respectively.

Other One factor weighing on oil prices is the strength of the dollar. Today, the euro is down 0.51% against its US currency pair, forming a cross of $1.0677 for each common currency.

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