Dow Jones Falls as Debt Ceiling Concerns Mount

　　

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The Dow Jones Industrial Average extended its decline for the fourth consecutive day amidst mounting concerns over a potential default as U.S. lawmakers struggled to reach an agreement on the country’s debt ceiling. The Dow dropped 255.59 points, or 0.77%, closing at 32,799.92, while the S&P 500 and Nasdaq Composite also experienced losses. House Speaker Kevin McCarthy blamed Democrats for delayed negotiations on spending caps and expressed hope for progress. Treasury Secretary Janet Yellen warned of a “highly likely” default in early June, leading to stress in financial markets. The market remained cautious due to overbought conditions and growing fears about an unfavorable debt ceiling outcome.

Despite the Federal Reserve’s minutes indicating uncertainty about raising rates in June, stocks continued to hover near their lows. Investors were selling amid heightened fears, leading to a “pullback mode” in the market. The ongoing earnings season saw surprises as Kohl’s and Abercrombie & Fitch reported unexpected profits, resulting in significant stock increases. Semiconductor giant Nvidia’s results were eagerly anticipated after the closing bell. With June 1 approaching, the market remained apprehensive, awaiting further data releases and developments surrounding the debt ceiling negotiations.

Data by Bloomberg

On Wednesday, all sectors of the market experienced a decline, with the overall market decreasing by 0.73%. The energy sector was the only one to see a slight increase of 0.52%. The sectors that suffered the most significant losses were real estate (-2.21%), financials (-1.31%), and industrials (-1.27%). Other sectors that experienced declines include materials (-1.12%), health care (-0.66%), consumer staples (-0.65%), utilities (-0.63%), information technology (-0.62%), communication services (-0.60%), and consumer discretionary (-0.23%).

Major Pair Movement

The USD index reached a two-month high of 103.91 due to ongoing uncertainty surrounding the U.S. debt ceiling and rising geopolitical tensions between China and Russia, which increased risk aversion in the market. The dollar held onto its gains as the Federal Reserve Governor Christopher Waller made relatively hawkish comments, expressing concerns about inflation and stating that his decision on whether to raise interest rates in June would depend on upcoming data. The Fed minutes from their May meeting provided no new insights for near-term policy direction, although some participants believed additional policy tightening might be necessary if the economy followed their outlook.

In currency markets, the euro weakened slightly against the dollar, while EUR/GBP saw some buying activity despite higher-than-expected UK inflation. USD/JPY broke above recent resistance levels but retreated from its peak as the Fed minutes failed to provide fresh momentum for expectations of higher U.S. rates. GBP/USD continued its decline amid broader risk-off sentiment related to the debt ceiling crisis, and the UK inflation miss raised doubts about the government’s ability to manage inflation as forecast. In the cryptocurrency market, Bitcoin experienced a 3.5% drop to $26.3k, influenced by the outlook of higher interest rates from the Fed, with support levels at risk of being breached.

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
USD	Prelim Gross Domestic Product q/q	20:30	1.1%
USD	Unemployment Claims	20:30	249K

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