US stocks ended lower on Wednesday as investors kept a close eye on the prospects for the debt ceiling agreement in an expected vote in the House of Representatives. Meanwhile, strong US jobs data and China's economic woes put pressure on global markets.
The S&P 500 (^GSPC) fell 0.60%, while the Dow Jones Industrial Average (^DJI) fell 0.40%, or more than 130 points. The tech-heavy Nasdaq Composite (^IXIC) slipped 0.63%.
US bond yields weakened as investors worried about the potential impact of the debt ceiling agreement and reviewed the release of new jobs data. The benchmark 10-year government bond yield fell to 3.62%. The yield on the two-year bond, which is more interest-rate sensitive, fell to 4.3%, while the yield on the 30-year bond fell to 3.84%.
Stocks lost momentum as the Labor Department reported job vacancies rose to over 10.1 million, while economists had expected 9.4 million vacancies.
The numbers underscore that “job tightness is unlikely to slide off the cliff, but rather continues down a bumpy path,” Oxford Economics wrote in a note on Wednesday. “While there are some concerns about the accuracy of the JOLTS survey due to historically low response rates, the conclusion remains that labor market strength remains robust.”
Given the latest economic data, markets are pricing in a 25 basis point rate hike by the Fed at the June 13-14 policymakers' meeting. On the commodity side, the dollar index rose while crude oil fell below $70 a barrel.
Still, investors remain very excited about the latest developments in Washington. The debt ceiling agreement negotiated by President Joe Biden and House Speaker Kevin McCarthy passed its first major test on Tuesday when it received approval from the Republican-led House Committee, despite opposition from hardliners. This cleared the way for the deal to be negotiated in the House of Representatives on Wednesday.
Time is running out as Congress must scramble to pass the deal to avoid a catastrophic default by June 5. On this so-called X-date, the US will run out of money to pay its bills, Treasury Secretary Janet Yellen has warned.
Meanwhile, both Federal Reserve Governor Philip Jefferson and Philadelphia Federal Reserve Chairman Patrick Harker signaled on Wednesday that the central bank could suspend rate hikes at its next monetary policy meeting. Regardless, the economy showed signs of cooling as hiring and inflation slowed, the Federal Reserve said in its Beige Book survey of regional business contacts.
Elsewhere, factory activity in China slumped to its weakest for the second straight month, in another sign that the post-pandemic economic recovery is losing momentum. Asian markets slumped after the data was released.
On the real estate front, mortgage demand fell to its lowest level since March, while refinancing activity also eased to another low, Wednesday's MBA data showed.
Meanwhile, company news from Hewlett Packard Enterprise Company (HPE) plummeted more than 7% after the company reported a second-quarter revenue decline and revised downward its full-year revenue guidance.
Still, the surge in AI-related stocks lost momentum after enthusiasm for the technology helped boost the Nasdaq 100 Index (^NDX) on Tuesday. ChargePoint Holdings, Inc. (CHPT) shares were flat while C3.ai, Inc. (AI) slumped more than 8% on Wednesday.
On an individual stock basis, SoFi Technologies, Inc. (SOFI) stock rose more than 15% on the back of the debt ceiling agreement. The bill would reintroduce state student loan repayments, which would benefit the online personal finance business.
HP Inc. (HPQ) shares fell more than 5% after the computing giant on Tuesday announced better-than-expected quarterly earnings but sales fell more than analysts estimated.
Intel Corporation (INTC) shares rose more than 4% after the chipmaker said current-quarter revenue was on track to come in at the high end of its guidance.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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