US stocks were lower on Wednesday morning as investors eyed the prospects for the debt ceiling agreement in an expected vote later in the House of Representatives. Meanwhile, China's economic woes put pressure on world markets.
The S&P 500 (^GSPC) fell 0.52%, while the Dow Jones Industrial Average (^DJI) fell 0.69%, or more than 200 points. The tech-heavy Nasdaq Composite (^IXIC) is down 0.13% as of 10:06am ET.
US bond yields weakened as investors worried about the potential impact of the debt ceiling agreement and braced for the release of new jobs data. The benchmark 10-year government bond yield fell to 3.68%. The two-year bond yield fell to 4.4%, while the 30-year bond yield fell to 3.9%.
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.
The hawkish comments from Federal Reserve officials presented a headwind for Wall Street. Thomas Barkin, President of the Federal Reserve Bank of Richmond, said at an event Tuesday at the National Association for Business Economics he was looking for signs of a slowdown in the economy Demand to be confident that inflation will ease.
Meanwhile, in an interview with the Financial Times published Wednesday, Loretta Mester, president of the Federal Reserve Bank of Cleveland, said she sees no “compelling reason” to delay rate hikes under the debt ceiling agreement.
Fed officials Patrick Harker, Susan Collins and Michelle Bowman are expected to speak publicly later on Wednesday.
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.
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.
Wednesday's economic report brought the latest information on the number of vacancies. According to data from the US Bureau of Labor Statistics, the number of job vacancies in the US rose slightly to 10.1 million. Economists polled by Bloomberg had expected 9.4 million opens.
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.
In US equities, the rise 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 lower, while C3.ai, Inc. (AI) slumped more than 6% on Wednesday.
On an individual stock basis, SoFi Technologies, Inc. (SOFI) stock rose more than 4% amid the debt cap agreement. The bill would reintroduce state student loan repayments, which would benefit the online personal finance company.
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.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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