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[1/3] Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 16, 2023. REUTERS/Brendan McDermid
HONG KONG, May 16 (Reuters) – US equities closed lower on Tuesday and government bond yields continued to rise as mixed economic data, weak corporate earnings and ongoing debt ceiling negotiations in Washington dampened investor risk appetite.
While all three major U.S. stock indices fell, losses from the tech-heavy Nasdaq were held in check by momentum megacaps including Amazon.com (AMZN.O), Alphabet Inc (GOOGL.O) and Microsoft Corp (MSFT.O).
President Joe Biden and Speaker of the House of Representatives Kevin McCarthy met to try to work out details of an agreement to raise the US debt ceiling to avoid a catastrophic default by an impending deadline.
“It’s questionable if there’s enough time to get a full deal done rather than a temporary extension, but that doesn’t mean they can’t come to an agreement in a few weeks,” said Tom Hainlin, national investment strategist at US Bank Asset Management in Minneapolis. “It’s just that the timeline is more compressed this time around, and these negotiations are taking place in the public sphere, and that leads to increasing volatility until we come to an agreement.”
Disappointing results from Home Depot (HD.N), the largest US home improvement chain, coupled with weaker-than-expected retail sales data, suggested that consumer spending is losing some momentum as restrictive monetary policy dampens demand.
However, a core measure of retail sales suggested that US consumers continue to strengthen the economy.
“We have a cautious outlook for the year, but so far we’ve weathered the first quarter with fairly strong consumer spending and corporate earnings that weren’t as bad as expected,” Hainlin said. “But we’re not out of the woods yet.”
The Dow Jones Industrial Average (.DJI) fell 336.46 points, or 1.01%, to 33,012.14, the S&P 500 (.SPX) lost 26.38 points, or 0.64%, to 4,109.9 and the Nasdaq Composite (.IXIC) fell 22.16 points, or 0.18%, to 12,343.05.
European equities closed lower as disappointing earnings and US retail sales data led to weaker consumer spending.
The pan-European STOXX 600 index (.STOXX) lost 0.42% and the MSCI index of equities around the world (.MIWD00000PUS) lost 0.54%.
Emerging market equities rose 0.05%. MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) closed 0.14% lower, while Japan’s Nikkei (.N225) rose 0.73%.
US Treasury yields continued to rise on the back of economic data suggesting economic resilience despite the Federal Reserve’s restrictive policy.
Benchmark 10-year notes recently fell in price 7/32 to yield 3.5339%, from 3.508% late Monday.
The 30-year bond last fell 10/32 in price to yield 3.8601%, from 3.842% late Monday.
The greenback rallied slightly higher against a basket of world currencies after retail sales data showed underlying signs of consumer resilience as the focus shifted to Washington’s debt ceiling squabble.
The dollar index rose 0.2%, while the euro fell 0.1% to $1.0861.
The Japanese yen weakened 0.14% against the greenback at $136.32, while the pound last traded at $1.2482, down 0.36%.
Oil prices fell as weaker-than-expected economic data in both the United States and China dragged down a higher global demand forecast from the International Energy Agency (IEA).
US crude was down 0.35% to $70.86 a barrel, and Brent was down $74.91 a barrel, down 0.43% on the day.
The gold price fell in contrast to the rising dollar.
Spot gold fell 1.5% to $1,990.68 an ounce.
Reporting by Selena Li; Edited by Muralikumar Anantharaman