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U.S. stocks close lower amid debt ceiling drama

24 May 2023, 08:44 GMT+10

NEW YORK, May 23 (Xinhua) -- U.S. stocks ended lower on Tuesday as debt ceiling talks appeared to make little progress ahead of the June 1 deadline to avert a catastrophic U.S. default.

The Dow Jones Industrial Average fell 231.07 points, or 0.69 percent, to 33,055.51. The S&P 500 sank 47.05 points, or 1.12 percent, to 4,145.58. The Nasdaq Composite Index shed 160.53 points, or 1.26 percent, to 12,560.25.

Ten of the 11 primary S&P 500 sectors ended in red, with materials and technology leading the laggards by losing 1.54 percent and 1.50 percent, respectively. Energy bucked the trend by rising 1.04 percent.

U.S. stocks fell Tuesday as House Speaker Kevin McCarthy told fellow Republicans that the debt ceiling negotiations still have some distance to go, with government spending cuts remaining a major obstacle between the two sides, according to Bloomberg.

Investors have been closely watching the debt limit impasse this week. U.S. President Joe Biden and McCarthy failed to reach a deal to raise the debt limit in a Monday meeting that McCarthy described as "productive," while Treasury Secretary Janet Yellen warned again that the United States could default on its obligations as soon as June 1.

Once again, it's been a relatively lively day as far as headlines are concerned and yet there's still a feeling of hesitance in the markets, said Craig Erlam, senior market analyst at OANDA, a supplier of online multi-asset trading services.

"We're still waiting to see a resolution on the debt ceiling, which will undoubtedly come, after more promising talks between President Biden and House Speaker McCarthy," said Erlam.

Meanwhile, investors are paying attention to some indications suggesting the U.S. economy remains resilient, albeit debt ceiling fears mount.

The S&P Global reported Tuesday that the U.S. flash composite purchasing managers' index rose to 54.5 in May, up from 53.4 in April. It marked a 13-month high for the index.

In particular, U.S. services business activity index improved to 55.1 in May from 53.6 in April, also hitting a 13-month high. U.S. manufacturing output index, however, weakened to 51.0 in May from 52.4 in April, the lowest in two months, according to S&P Global.

The economic expansion gathered further momentum in May, but an increasing dichotomy is evident, Chris Williamson, chief business economist at S&P Global Market Intelligence, noted on Tuesday.

"While service sector companies are enjoying a surge in post-pandemic demand, especially for travel and leisure, manufacturers are struggling with over-filled warehouses and a dearth of new orders as spending is diverted from goods to services," said Williamson.

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