Business

ASX set to slide as debt ceiling jitters weigh on markets

But the stock market hasn’t shown as much concern. Buchanan said that may be because it’s difficult to know how prices across different markets would react to something that’s never happened before and was once unthinkable.

He said he hasn’t made any moves to investments he oversees because of fears of a default, at least not yet.

“I think everyone’s taking it moment by moment,” he said. “Every minute that goes by raises the urgency.”

The worries about the debt ceiling are coming on top of concerns that the slowing economy could be heading for a recession, even without a default. A preliminary report released Tuesday morning suggested the economy remains split, with growth for travel and other service businesses strengthening while manufacturing remains under pressure.

“The US economic expansion gathered further momentum in May, but an increasing dichotomy is evident,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

On Wall Street, AutoZone dropped 6 per cent after reporting weaker growth in revenue for the latest quarter than analysts expected. It pointed to a slower-than-expected March.

Electric vehicle maker Lordstown Motors fell 5.3 per cent to 28 cents after it announced a reverse stock split in order to boost its share price. Investors will get one new share for every 15 they currently hold. Its stock has remained below $US1 since mid-March.

On the winning side of Wall Street was Lowe’s, which rose 1.7 per cent after reporting stronger profit and revenue for the latest quarter than analysts expected. But it also cut its financial forecasts for the year partly because of lower-than-expected sales to do-it-yourself customers.

Retailers are among the last companies to report their results for the first three months of the year, and most companies have been beating expectations. Retailers in particular have gotten lots of attention because resilient spending by US households has been one of the main positives keeping the economy out of a recession.

Manufacturing and other areas of the economy are struggling under the weight of much higher interest rates meant to get inflation under control.

High interest rates have also meant stress for the US banking system. Three high-profile bank failures since March have rattled the system, and Wall Street has been on the hunt for the next bank that could suffer a debilitating drop in confidence by its customers.

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Some of the heaviest scrutiny has been on PacWest Bancorp, but it rallied for a second day after announcing the sale of a $US2.6 billion ($3.9 billion) portfolio of real-estate construction loans. It rose another 7.9 per cent after jumping 19.5 per cent Monday.

Other banks also strengthened, including a 4.6 per cent jump for Zions Bancorp.

All told, the S&P 500 lost 47.05 points to 4,145.58. The Dow dropped 231.07 to 33,055.51, and the Nasdaq lost 160.53 to 12,560.25.

In the bond market, the 10-year Treasury yield ticked down to 3.70 per cent from 3.72 per cent late Monday. It helps set rates for mortgages and other important loans.

The two-year yield, which moves more on expectations for the Fed, inched up to 4.34 per cent from 4.32 per cent.

Most stock markets abroad fell, including a 1.3 per cent drop for Paris and a 1.5 per cent slide for Shanghai.

AP

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