Stocks fell Tuesday as ongoing debt ceiling discussions appeared to yield little progress.
The S&P 500 dropped 1.12% to settle at 4,145.58, while the Nasdaq Composite pulled back 1.26% to close at 12,560.25. The Dow Jones Industrial Average lost 231.07 points, or 0.69%, to finish at 33,055.51.
Some traders interpreted the lack of any major updates on negotiations as a sign that lawmakers, perhaps, are struggling to progress as hoped.
Investors have been closely eyeing debt-limit negotiations in Washington, hoping for more certainty as the so-called June 1 X-date expected by Treasury Secretary Janet Yellen fast approaches. Some House Republicans on Tuesday questioned the accuracy of this projected default date.
On Monday, Kevin McCarthy and President Joe Biden met at the White House, in a discussion that the House speaker described as "productive" and "professional," although the hourlong talk concluded without a resolution.
"We are sending a very negative signal about our ability to run our economy, let alone be a anchor for the rest of the world," Mohamed El-Erian said on CNBC's "Squawk Box" on Tuesday. "And the market so far has actually dealt with it very well."
The Allianz chief economic advisor said he's "very impressed" by the recent market stability. El-Erian added that he views the S&P 500 as fairly priced despite this recent headwind and uncertainty surrounding the Federal Reserve's next rate move.
While lawmakers should achieve a resolution to the debt ceiling woes, Aspiriant's Sandi Bragar remains cautious as recession fears persist. Recent history suggests a downturn will likely come when the Federal Reserve completes its hiking cycle, she added.
"Everyone just feels like there is a party in the market and wanting to participate," the chief client officer said. "I don't think that it's really time to get too excited just yet. There's reason to be cautious here."
Elsewhere, Apple moved 1.5% lower after announcing a multibillion-dollar chip production deal with Broadcom. The chip stock gained 1.2%. Yelp popped 5.7% as an activist investor called for the company to explore a sale.
—CNBC's Christina Wilkie contributed to this report.
Stocks finish lower on Tuesday, S&P 500 drops 1.1%
Consumer staples, utilities vulnerable to backup in bond yields, Strategas says
Consumer staples and utility stocks are vulnerable to this month's backup in 10-year and 30-year Treasury yields, said Chris Verrone, head of technical and macro research at Strategas Securities.
"Rates have continued to show some life over the last few weeks, and with upward pressure on yields has come downward pressure to Staples and Utilities both of which traded to multi month relative performance lows" on Monday, Verrone wrote in a note Tuesday. Utility stocks are faring worse than staples, "spending much of the last 6 months below the 200-day [moving average] and home to some pronounced top formations at the individual stock level."
Ten-year Treasury note yields touched 3.725% on Tuesday, the highest since March 13, and about 46 basis points higher just since April 6. A basis point is 1/100th of a percentage point.
Meanwhile, the S&P 500 Utility Index is down almost 5% in May (second worse only to energy stocks), S&P 500 Consumer Staples stocks are off by 4.2% in May, while the S&P 500 Index is down only 0.5% this month.
— Scott Schnipper, Michael Bloom
BlackRock launches two active ETFs, including a fund run by Rick Rieder
BlackRock debuted two actively managed ETFs on Tuesday, managed by two of the asset management giant's top investors.
The BlackRock's Flexible Income ETF (BINC) is managed by Rick Rieder, the firm's CIO of global fixed income. The actively managed fund has a net expense ratio of 0.40%, and is aiming for a yield of 7%.
BlackRock also debuted an active equity fund. The BlackRock Large Cap Value ETF (BLCV) is managed by Tony DeSpirito, the firm's global CIO of fundamental equities.
— Jesse Pound
Buy the dip on silver, Citi says
Silver futures are down more than 5% over the past month, but Citi thinks this is a buying opportunity.
"Silver prices have retraced below $24/oz ... as weak economic data have undermined confidence in China's economic rebound. Having said this, our trade recommendation remains up 4.8%, and we see this pullback as a buying opportunity and reiterate our call for silver to hit $30/oz by year-end," wrote Citi's Viswanathrao Kintali. "We think this is achievable purely in response to a US growth rollover, however a major China easing would be a bullish kicker for the trade."
— Fred Imbert, Michael Bloom
Casino stocks fall as health official says China should see 65 million weekly Covid cases in new wave
Bloomberg reported Monday morning that China will likely see a peak of 65 million Covid infections a week in its next wave toward the end of June, citing a senior health official. The official said the country should see around 40 million infections per week by the end of May before reaching the peak.
— Alex Harring
Vaccine stocks jump
Shares of a slew of Covid-19 vaccine makers surged on Tuesday.
The moves came amid reports of a potential new wave of Covid-19 infections in China that could lead to millions of new cases each week.
— Samantha Subin
Shares of hotel franchiser Wyndham jump on news of potential buy deal
Shares of Choice Hotels fell 3.6% on the news. The two budget hotel franchises are currently in serious talks, according to the report.
— Hakyung Kim
Stocks hover near lows
Stocks traded near their lows as the final hour of trading commenced.
The Dow was last down about 183 points, or 0.6%. The S&P 500 lost 0.9% and Nasdaq Composite traded 1.1% lower.
— Samantha Subin
Bank of America says Broadcom is the ‘most underappreciated AI beneficiary’
Broadcom is the "most underappreciated AI beneficiary" after its deal with Apple, according to Bank of America.
Analyst Vivek Arya hiked his price objective on the stock after Apple on Tuesday announced a multibillion-dollar deal with Broadcom for 5G radio frequency components made in the U.S., saying it removes an "overhang" on the stock.
"We believe this is a positive development as it removes one key overhang on AVGO stock – namely the risk of Apple's insourcing of connectivity components – surfaced in media reports earlier this year," Arya wrote in a Tuesday note.
Shares added about 2% during Tuesday's trading session.
— Sarah Min
House Republicans question urgency of June 1 deadline
Some House Republicans on Tuesday raised skepticism over Treasury Department Secretary Janet Yellen's deadline to raise the debt ceiling and avert a default.
"We'd like to see more transparency on how they come to that date," House Majority Leader Rep. Steve Scalise said Tuesday at a news conference.
He added that Yellen's Monday comments signal some "openness to the idea that June 1 may not be the so called X-date."
— Christina Wilkie, Samantha Subin
Watch this chipmaker for a break into the top of artificial intelligence roster, Bank of America says
Advanced Micro Devices could be on track to gain a greater market share of the artificial intelligence accelerator market, according to Bank of America.
"AMD is on the verge of another large opportunity in the $80bn AI accelerator market (by CY27E) where AMD's share is again effectively zero against leader Nvidia," analyst Vivek Arya said.
The firm remains neutral on AMD stock but raised its price target on Monday.
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— Brian Evans
Odds of U.S. government default are still low, BlackRock's Rieder says
BlackRock CIO of global fixed income Rick Rieder said that he remains confident lawmakers will work out a deal on the debt ceiling.
"I think the markets and myself are putting a very high probability that something gets done. The timing of that is unclear," Rieder said at a media event Tuesday.
The fixed income investor acknowledged that Treasury Secretary Janet Yellen's warning of an early June deadline was earlier than many experts previously expected.
"I think there's a sense of urgency now that you've got to come to a conclusion on this over the next couple of weeks, and presumably get to at least a framework by the end of this week," Rieder added.
— Jesse Pound
Microsoft is Jefferies' top pick thanks to artificial intelligence bullishness
Microsoft will keep gaining traction as investors add to artificial intelligence bets, according to Jefferies.
"MSFT has taken pole position in what is likely to be a decade-long industry evolution," Jefferies analyst Brent Thill said. "AMZN won round 1 of Cloud wars. MSFT could be the winner of round 2."