NEW YORK — Stocks tumbled Tuesday as the US government faced a dire default on its debts.
The S&P 500 fell 1.1% after House Speaker Kevin McCarthy said a deal that would prevent the U.S. government from running out of money as early as June 1 was “still not there.” Mr. Biden claimed to be productive, but ultimately fell short of a deal.
The Dow Jones Industrial Average fell 231 points, or 0.7%, while the Nasdaq Composite Index fell 1.3%.
Wall Street expects Congress to reach a deal in the 11th hour, as it has done several times before. Because the alternative seems too dire for anyone to accept. Economists and investors widely believe that a default will shock the global economy and financial markets.
But there are also concerns that the U.S. government won’t feel the urgency to act until financial markets rock hard enough to catch fire under politicians from both parties.
There are also concerns about the possibility of a recession. A preliminary report released Tuesday morning suggested the economy remained fragmented, with growth in travel and other services strengthening while manufacturing remains under pressure.
On Wall Street, Autozone, which reported slower-than-expected sales growth in the latest quarter, fell 6%.
Electric car maker Rosetown Motors fell 5.3% to 28 cents after it announced a reverse stock split to boost its share price. Investors can get one new share for every 15 shares they currently own. The company’s stock has been trading below $1 since mid-March.
Lowe’s rose 1.7% after it announced better-than-expected earnings and sales in the latest quarter, but also cut its full-year earnings forecast.
High interest rates have put stress on the U.S. banking system, with three high-profile bankruptcies since March.
Amid heavy scrutiny, PacWest Bancorp rebounded in a second day after announcing the sale of a $2.6 billion portfolio of real estate construction loans. It rose another 7.9% after gaining 19.5% on Monday.
Other banks also rose, including Zions Bancorp, which rose 4.6%.
Overall, the S&P 500 fell 47.05 points to 4,145.58. The Dow fell $231.07 to $33,055.51 and the Nasdaq fell $160.53 to $12,560.25.
In the bond market, the 10-year Treasury yield fell to 3.70% from 3.72% late Monday. Helps set interest rates for mortgages and other important loans. Yields on two-year bonds climbed to 4.34% from 4.32%.
Most overseas stock markets fell, with Paris dropping 1.3 percent and Shanghai dropping 1.5 percent.