The meeting between President Joe Biden and House Speaker Kevin Mccarthy has seemingly affected the United States stocks drastically.
The stocks closed low on Tuesday, the day of the meeting between Biden and McCarthy, as investors were keen to know the latest developments from the meeting regarding the changes that could come over in the debt ceiling and also for the latest updates regarding inflation.
The Dow Jones Industrial Average saw a decline of almost 0.74% which is more than 50 points. Along with Dow Jones, other companies like PayPal and S&P 500 also saw a decline too. While S&P saw a decline of 0.64%, the technology-heavy Nasdaq Composite reported a fall of 0.63%.
While most of the U.S. stocks saw a massive decline in their stocks, it was surprising to note that PacWest Bancorp’s shares saw a rise of 2%.
The rise in the stocks of the company has also helped to reverse the loss that it faced as a result of the volatility that has affected regional banking. While there had been a fall in the majority of the U.S. stocks, oil prices saw a rise to $73.54 per barrel.
The decision regarding the debt ceiling is still a debated topic in Congress and the opinion has also divided the House into two. While one group supports the idea of raising the federal government’s debt ceiling, another group strongly rejects the idea.
The current debt ceiling of the government stands at $31 trillion and the government is under the possibility of running out of cash by June 1, with added effects from the inability of the country’s banking sector and other similar events.
The margin between the groups that debate for and against the proposal is also very thin, which adds further complications to the matter.
President Joe Biden, who is against the idea of raising the federal government’s debt ceiling met with the congressional leaders on Tuesday in order to discuss the subject and to discover a feasible answer to the situation.
Experts and analysts suggest that the country is closing in on a default, which means that it will not be able to make a repayment of the required interest or principal amount.
In light of the situation in the country, nearly half of the banks in the country are making serious changes in their lending standard. The banks are tightening the conditions that should be met in order to qualify for a loan from them.
This can pose a problem to the economic growth of the country as there is a high chance of big companies cutting down their investments in different sectors if they fail to qualify for loans from the banks.
According to an analyst from JP Morgan & Chase, the tight credit conditions have the potential to ‘act as a de-facto Fed hike.’
Companies are on the lookout for the inflation report that is expected to be published on Wednesday as it is said to give an idea of whether the Federal Reserve will continue its hike on the interest rates.
According to the statement made by John Williams, the president of the New York Federal Reserve, on Tuesday, he warned that inflation still remains too high due to a strong market job.
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Taking a better look at the economic data, it clearly shows that small business owners have lost their confidence in their businesses, and the fall of such businesses in April is cited to be the lowest they have fallen since 2013. This indicates that there will be a pullback in investments made through small businesses.
As for the earnings of different companies, results are yet to be heard from companies like Airbnb Inc, Rivian Automotive Inc, and Occidental Petroleum.
These companies are expected to reveal their income and revenue reports on Wednesday. While most of the companies reported a steep fall in their shares, the notable loss among them was of the American multinational financial technology company PayPal. The shares of the company reported a fall of over 12% on Tuesday.
While the majority of the companies saw a fall in their shares, there were a few other companies that reported a growth in the value of their shares. The shares of Palantir Technologies Inc, in single stock moves, saw a large growth which was reported to be around 23% on Tuesday.
The revenue reports of the company from its first quarter also show that the company has surpassed the expected numbers and the company also shared its expectations to stay profitable all throughout the year.
Amidst the backlashes, the company faced in regard to manufacturing defects and late deliveries of goods, popular airline manufacturer company Boeing also reported a growth in the share values of the company.
Similarly, even after announcing a possible layoff of almost 25% of its global workforce, the shares of Novavax saw an increase of 27%.
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