(Bloomberg) — Traders remained reluctant to pile back into riskier assets after Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen both warned that a U.S. default due to a failure to raise the debt ceiling would have catastrophic consequences.
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In a tumultuous trading session, heated remarks from Senator Elizabeth Warren also weighed on stocks. After slamming Powell on his track record over financial regulation, Warren said he’s a “dangerous man to head up the Fed” and that’s why she’ll oppose his renomination. Meantime, House progressives are lining up to defy Speaker Nancy Pelosi and oppose a bipartisan infrastructure bill, potentially endangering President Joe Biden’s economic agenda.
Read: Debt Ceiling Angst Drives Investors to Fed Facility From T-Bills
Democratic leaders are discussing how to raise the debt ceiling after Yellen said her department will effectively run out of cash around Oct. 18 unless Congress suspends or increases the limit. Her latest timeline is somewhat sooner than many on Wall Street anticipated, and the warning intensified signs of market concern amid an impasse between Republicans and Democrats on addressing the situation.
“We would expect a deal to get done, but it appears as though both sides are a bit more entrenched compared to previous periods,” said Brian Price, head of investment management at Commonwealth Financial Network. “A government shutdown is a risk factor that we’ll be watching in the coming days and weeks.”
The S&P 500 extended its September selloff, led by losses in technology companies. Trading volume was about 30% above the average of the past month, according to data compiled by Bloomberg. The yield on Treasury 30-year bonds climbed more than 10 basis points earlier Tuesday. The dollar rallied.
The world economy is facing a buildup in stagflationary forces as surging energy prices boost inflation and slow the recovery from the pandemic recession. Brent oil hovered near the key, psychological level of $80 a barrel, while natural gas surged.
U.S. consumer confidence dropped in September for a third straight month, suggesting concerns over the delta variant and higher prices continue to dampen sentiment. Home prices surged 19.7% in July — once again posting the biggest jump in more than 30 years.
Here are some events to watch this week:
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Japan’s ruling party votes to elect leader, Wednesday
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Central bank chiefs Andrew Bailey (BOE), Haruhiko Kuroda (BOJ), Christine Lagarde (ECB) and Jerome Powell (Fed) participate in an ECB Forum panel, Wednesday
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House Financial Services Committee hearing on the Fed, Treasury’s pandemic response, Thursday
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China Caixin manufacturing PMI, non-manufacturing PMI, Thursday
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Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending, spending/personal income, Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
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The S&P 500 fell 1.5% as of 2:51 p.m. New York time
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The Nasdaq 100 fell 2.2%
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The Dow Jones Industrial Average fell 1.1%
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The MSCI World index fell 1.5%
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The Russell 2000 Index fell 1.5%
Currencies
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The Bloomberg Dollar Spot Index rose 0.5%
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The euro fell 0.1% to $1.1680
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The British pound fell 1.2% to $1.3538
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The Japanese yen fell 0.5% to 111.54 per dollar
Bonds
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The yield on 10-year Treasuries advanced four basis points to 1.53%
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Germany’s 10-year yield advanced two basis points to -0.20%
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Britain’s 10-year yield advanced four basis points to 0.99%
Commodities
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West Texas Intermediate crude fell 0.5% to $75.11 a barrel
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Gold futures fell 1% to $1,734.80 an ounce
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