FILE - Flags adorn the facade of the New York Stock Exchange, Wednesday, June 16, 2021. (AP Photo/Richard Drew, File)
NEW YORK (AP) – A worldwide swoon for financial markets is carrying over to Wall Street, and stocks are slipping further. The S&P 500 was 0.5% lower in early trading Wednesday, a day after dropping 1.1% as the U.S. government creeps closer to a possibly disastrous default on its debt. The Dow Jones Industrial Average and the Nasdaq composite also fell. Other markets around the world were hit even harder as discouraging figures piled up on the economy. Kohl’s jumped 15% after reporting a surprise profit for its latest quarter, helped in part by momentum at its Sephora beauty shops.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
U.S. markets followed global stock markets lower early Wednesday as the U.S. government crept closer to a catastrophic debt default.
Futures for the S&P 500 and the Dow Jones Industrial Average declined more than 0.3%.
The longstanding Washington debate over the size and scope of the federal government now has just days to be resolved, with the Treasury Department saying the government risks running out of cash to pay its bills next week. Negotiators are expected to convene Wednesday for another round of talks as frustration mounts.
The political standoff is tipping the country closer to a crisis, roiling financial markets and threatening the global economy. Anxious retirees and social service groups are among those making default contingency plans.
Failure to raise the nation’s debt ceiling, now at $31 trillion, would risk a potentially chaotic federal default, almost certain to inflict economic turmoil at home and abroad.
Republicans in Washington are pressing for cuts in aid to the poor and other spending in exchange for agreeing to raise the amount the government can borrow. President Joe Biden has proposed a mix of cuts and higher taxes on the richest Americans, which Republican House Speaker Kevin McCarthy has rejected.
Without an agreement, Treasury Secretary Janet Yellen says the government will run out of cash to pay bills around June 1.
Market prices of Treasury debt that is due to be paid around the date of a possible default have fallen due to uncertainty about payment.
The yield on the 10-year Treasury, or the difference between the market price and the payout at maturity, continued to tick down, falling to 3.67% from 3.70% late Tuesday. The yield on the two-year Treasury slipped to 4.28% from 4.33%.
Investors already were worried about slowing global economic growth following interest rate hikes in the United States, Europe and Asia to rein in surging inflation. Three high-profile bank failures in the U.S. and one in Switzerland have also kept them on edge.
Manufacturing and other areas of the U.S. economy are struggling under the weight of higher rates.
At midday in Europe, London’s FTSE 100 and The CAC 40 in Paris both retreated 1.7%, while the DAX in Frankfurt lost 1.6%.
In Asia, the Shanghai Composite Index lost 1.3% to 3,204.74 and the Nikkei 225 in Tokyo fell 0.9% to 30,682.68. The Hang Seng in Hong Kong shed 1.6% to 19,115.93.
The Kospi in Seoul ended unchanged at 2,567.45 and Sydney’s S&P-ASX 200 lost 0.6% to 7,213.80.
India’s Sensex declined 0.2% to 61,844.60. New Zealand and Bangkok gained while Singapore and Jakarta declined.
In energy markets, benchmark U.S. crude rose $1.18 to $74.09 per barrel in electronic trading on the New York Mercantile Exchange. The contract advanced 86 cents on Tuesday to $72.91. Brent crude, the price basis for international oil, gained $1.11 to $77.95 per barrel in London. It added 85 cents the previous session to $76.84.
The dollar fell to 138.37 yen from Tuesday’s 138.48 yen. The euro gained slightly to $1.0778 from $1.0776.
Wall Street’s benchmark S&P 500 index fell 1.1% on Tuesday. The Dow dropped 0.7% and the Nasdaq composite lost 1.3%.
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McDonald reported from Beijing; Ott reported from Silver Spring, Md.
