NEW YORK (AP) — Wall Street is reeling in mixed trading Tuesday after Washington reached a tentative deal. To avoid the worst possible problem with the debt.
The S&P 500 was up 0.1% in midday trading, hovering near a nine-month high. The Dow Jones industrial average was down 124 points, or 0.4%, at 32,967 at 12:18 p.m. ET, as excitement about artificial intelligence helped the Nasdaq composite lead gains by 0.5%.
President Joe Biden and House Speaker Kevin McCarthy struck a deal over the weekend to allow the U.S. government to borrow more money, potentially closing the debt deficit. They must now convince Congress to approve it before the US government runs out of money to pay the bill, which could be as soon as Monday.
Some on Capitol Hill are unhappy with the details of the deal, and both Biden and McCarthy are working to rally votes. The House could vote on the matter on Wednesday.
Widespread hope on Wall Street was for Washington to reach an agreement at the 11th hour because a collapse could be painful for the economy and financial markets.
But in the absence of any precedent, all of Washington’s grandiose and partisan ingenuity up to this point could further erode trust and confidence in the US government. This could trigger another downgrade to the credit rating following the 2011 downgrade.
Beyond the drama surrounding the nation’s debt ceiling, financial markets have been grappling with more pressing issues. The economy is slowing, inflation is still high, and interest rates are likely to move higher, further tightening economic and financial markets.
The worries are global, with China’s economic recovery weaker than expected after easing anti-Covid restrictions.
Still, U.S. stocks rallied recently after reporting that gains at the start of the year had fallen, but not as much as feared. And at the center was Wall Street’s growing frustration with AI.
Nvidia chips, which are helping to power the tech world’s new boom, rose another 4.2 percent after more than doubling this year. Last week, he made a monster forecast for future revenues as he revealed that customers of all types will be racing to implement AI into their businesses.
Nvidia’s surge in total value is nearly $1 trillion, outpacing only the biggest stocks, including Apple. Another bubble is looming as huge gains wipe out the stock market. But evangelicals say AI is the next big revolution to reshape the global economy.
Helping to propel Wall Street in recent weeks are reports of a resilient labor market and other signs that a slowing economy is averting a recession.
A report on Tuesday morning showed confidence among consumers. Although lower than before the outbreak, it remains stronger than economists expected. This is key because the persistence of household spending is one of the main pillars that has forced investors to push back their forecasts for the next recession by three to six months.
On the losing end of Wall Street were companies in the energy industry. ExxonMobil fell 1.3 percent, and Chevron shed 1 percent. They were following crude oil prices amid concerns about oil demand.
The strength of the recent recovery in China, the world’s second-largest economy, has particularly worried energy prices.
In the bond market, Treasury yields were falling because of fears of a possible default.
The yield on the 10-year Treasury fell to 3.70% from 3.81% late Friday. It helps determine rates for mortgages and other loans.
The two-year Treasury yield fell from 4.57% to 4.50%. He closely monitors expectations of what the Federal Reserve will do.
Traders are bracing for another hike in short-term interest rates from the Fed at its next meeting in two weeks, but the prospect could be the last after more than a year of rapid growth.
Higher interest rates help slow inflation, but they do so by dragging down the entire economy, raising the risk of recession and hurting the value of investments.
In foreign markets, European stocks were lower while indices were mostly higher in Asia.
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AP Business writers Yuri Kagiyama and Matt Ott contributed.
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