Dow drops for a fourth straight day on U.S. default worries as debt ceiling talks stumble: Live updates

Stocks finished lower Wednesday as debt ceiling discussions dragged on for another day in Washington.

The Dow Jones Industrial Average dropped 255.59 points, or 0.77%, to close at 32,799.92. The S&P 500 lost 0.73% to end at 4,115.24, while the Nasdaq Composite edged 0.61% lower to settle at 12,484.16.

— Samantha Subin

The potential for another rate hike come June and July puts the Nasdaq Composite in risky territory, according to BTIG's Jonathan Krinsky.

"We think the NDX remains extremely vulnerable here, and thus far the rotation into the laggards remains elusive," wrote the chief market technician in a Wednesday note to clients, adding that he sees 13,200 as the next key test for the index.

Krinsky noted that Fed Funds futures in recent weeks have "quietly begun" to price in more increases, contradicting recent expectations that the central bank may be done hiking.

"Correlations come and go, but given the exhaustion signals in NDX, we think downside risk remains high here," he wrote.

— Samantha Subin

The Yuan is trading at its lowest level year to date as a new Covid-19 variant spreads across China, threatening the country's economic recovery.

As of Wednesday afternoon, the Chinese Offshore Renminbi was trading at 7.07 per U.S. Dollar, marking its weakest level since Dec. 2022.

"The yuan, along with weakness in industrial metals, have  been signaling continuing vulnerability in the Chinese economy as authorities grapple with geopolitical tensions, high youth unemployment, a property market mired in debt and municipal governments similarly impeded by high debt levels," said LPL Financial's chief global strategist Quincy Krosby. "Now authorities are facing a deeper slowdown as expectations rise for another significant outbreak of Covid."

Krosby added that unless proper fiscal stimulus measures are taken, the country's economic growth could be thwarted.

— Hakyung Kim

Eli Lilly shares could reach $500 a piece thanks in part to an obesity drug, Bank of America predicts.

Analyst Geoff Meacham raised his price target by $50 to $500, citing increased revenue forecasts for the tirzepatide. His new target implies shares could rally 18.1% from Tuesday's close.

Meacham also reiterated his buy rating on the pharmaceutical stock.

"The consumer / social media trends bolster our confidence in tirzepatide's commercial opportunity, as directionally, patients seem very interested in anti-obesity medications (AOMs), regardless of the administrative modality," he said in a note to clients Wednesday..

CNBC Pro subscribers can read more here.

— Alex Harring

Shares of regenerative medicine company Organogenesis rallied more than 16% after BTIG upgraded them to buy from neutral.

Analyst Ryan Zimmerman also slapped a $10 price target on the stock, which implies it could more than double over the next 12 months.

"We recently hosted ORGO mgmt ... and came away encouraged," Zimmerman said. "We believe the door is open for ORGO to capture meaningful share in the Surgical Recon market over the balance of FY23. Surgical Recon is an area ORGO has been positioning to go into as ORGO already has significant share in the physician office and HOPD setting."

— Fred Imbert, Michael Bloom

Sherwin-Williams, considered a bellwether for investor sentiment on the housing cycle, is worth buying, Jefferies said.

Analyst Laurence Alexander upgraded the paint stock to buy from hold and upped his price target by $35 to $275. His new price target implies shares could rally 21.1% over the next year from Tuesday's close.

"The housing cycle is turning: policy shocks that derail a recovery will likely have a much sharper impact on industrial and consumer goods companies," he said in a note to clients Wednesday. "Top-line benefits from share gains, margin benefits from raw material relief, and disciplined capital allocation should lead to above-trend EPS growth in 2025-2027."

CNBC Pro subscribers can click here to read more.

— Alex Harring

The Fed minutes showed "uncertainty" from participants about whether to increase rates for an 11th time at its June meeting.

There appeared to be two camps in the Fed now, according to the minutes. One group that contained "some" members judged that progress in reducing inflation was "unacceptably slow" and would necessitate further hikes. The other, backed by "several" FOMC members, saw slowing economic growth in which "further policy firming after this meeting may not be necessary."

The minutes do not identify individual members nor do they quantify "some" or "several" with specific numbers. However, in Fed parlance, "some" is thought to be more than "several."

Bottom line, the minutes showed the Fed would be closely watching the incoming data to decide whether to hike rates again on June 14.

— Jeff Cox, John Melloy

Correction: In Fed parlance, "some" is thought to be more than "several." An earlier version misstated the difference.

Check out the companies making headlines in midday trading.

Citigroup – Citigroup shares fell nearly 3%. The bank announced plans to spin off its Mexico business Banamex through an initial public offering after its efforts to find a buyer for the unit failed.

Moderna — The biotech company's shares fell more than 4%. The drop marks a sharp reversal for the stock, which has popped in recent days amid news of the new XBB variant wave of Covid cases in China. Beijing officials reportedly estimate this could result in 65 million new weekly cases by the end of June.

Abercrombie & Fitch – Shares of the apparel retailer soared 26% after the company reported fiscal first-quarter earnings and revenue that beat analysts' estimates, according to Refinitiv. The apparel retailer also issued strong guidance for the fiscal second quarter and full year.

The full list can be found here.

— Hakyung Kim

Energy stocks are bucking a broad sell-off on Wednesday, holding on to modest gains in afternoon trading.

The Energy Select Sector SPDR Fund (XLE) was last up about 0.2%. Exxon Mobil and Diamondback Energy were both up about 1%.

Crude prices are also higher for the day, though well off their highs of the session.

—Jesse Pound

Edward Jones' Mona Mahajan remains hopeful that lawmakers can reach an agreement on the debt ceiling before the so-called X-date, even as negotiations appear at a standstill.

"These debt ceiling negotiations tend to resolve in a last-minute fashion with concessions by both sides," the senior investment strategist said. "There certainly is a historical precedent of getting the job done, albeit, you know, there is some consternation and probably political theater leading up to the final resolution."

An agreement could fuel a relief rally in equities but will likely dwarf previous instances given the smaller depth of the recent selloff, she added.

Longer term, investors remain laser-focused on inflation and the Federal Reserve. A downshift in inflation and pivot from the central bank could offer the much-needed catalyst to push equities out of the current trading range, Mahajan added.

— Samantha Subin

Addressing a three-pronged question facing U.S. central bankers, Federal Reserve Governor Christopher Waller said it's just too soon to tell which choice is correct. Data in the coming weeks before the June 13-14 meeting will determine which is the proper path, he said.

While Waller insisted the Fed will need to "maintain flexibility" on whether it should hike, pause or skip June with an inclination to increase rates in July, he did express doubt that the Fed has gone as far as it needs in the fight against inflation.

"I do not expect the data coming in over the next couple of months will make it clear that we have reached the terminal rate," Waller said in prepared remarks for a speech in Santa Barbara, Calif.

"And I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2% objective. But whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks," he added.

— Jeff Cox

House Speaker Kevin McCarthy reiterated that negotiators should reach a resolution on the debt ceiling even as lawmakers struggle to agree on baseline spending.

"We're not going to default," he said during a press conference Wednesday. "We're going to solve this problem. I will stay with it until we can get it done. But let's be honest about this. We had to spend less than we spent last year. It is not my fault that the Democrats cannot give up on their spending."

— Samantha Subin, Sarah Min

Netflix shares should get a boost as password sharing regulations officially comes to the U.S., according to Oppenheimer.

Netflix said Tuesday that it began notifying U.S. customers that they could either send a profile so someone else could make their own account, or pay a $7.99 fee per additional stream. It's the latest development in the streaming giant's global bid to crack down on password sharing, with new regulations previously rolled out in international markets.

Oppenheimer analyst Jason Helfstein upped his price target by $35 to $450, while reiterating his outperform rating. His new price target implies an upside of 26.4% over Tuesday's close.

CNBC Pro subscribers can read more about Helfstein's take here.

— Alex Harring

Seven S&P 500 stocks fell to fresh lows on Wednesday. These include Paramount, as well as pharmaceutical firm Organon, which was trading at all time lows going back to its spin-off from Merck in June 2021.

Here are the stocks:

• Paramount trading at lows not seen since April 2020
• Organon trading at all-time lows back to its spin-off from Merck in June 2021
• Waters trading at lows not seen since Jan, 2021
• L3Harris Technologies trading at lows not seen since March 2021
• Qualcomm trading at lows not seen since July 2020
• Sealed Air trading at lows not seen since November 2020
• SBA Communications trading at lows not seen since March 2020

On the other hand, Palo Alto Networks reached a notable 52-week high, trading at levels not seen since April 2022.

— Chris Hayes, Sarah Min

Financials and technology stocks slid on Wednesday, contributing to the S&P 500's 0.8% decline.

Falling shares of Lincoln National, Citigroup, Citizens Financial and Fifth Third contributed to a 1.2% loss in the benchmark index's financial sector.

Elsewhere, popular technology names and chipmakers, including Alphabet, Nvidia, Analog Devices and Intuit, contributed to a 1% decline in the communications services and information technology sectors.

Tesla shed 3.4% and cruise stocks Royal Caribbean, Carnival and Norwegian Cruise Line fell at least 3% each. The drop in shares pressured the consumer discretionary sector,

— Samantha Subin

Energy stocks have been able to sidestep the market downturn in Wednesday morning trading.

It was the only of the S&P 500's 11 sectors not trading down. The sector was up 0.8%, pulled up by gains of 1.7% and 1.4%, respectively, in Marathon Oil and Valero Energy.

By comparison, the index as a whole shed 0.8%, with financials performing the worst at nearly 1% down.

— Alex Harring

The dollar index rose on Wednesday to hit 103.74, its highest level since March 20.

Since the start of May, the dollar index's gained 1.9%, but is only marginally higher for the year. The index is on track for its first positive month in three.

— Gina Francolla, Samantha Subin

Shares of sold-off First Horizon are worth buying, even after its merger with TD Bank was killed, according to Jefferies.

Analyst Casey Haire upgraded the regional bank to buy from hold. Though he lowered his price target by $5 to $13, his new target still implies a 15.7% upside from where shares finished Tuesday's session. The upgrade comes ahead of an investor day for the company next month.

"Though investor days rarely deliver as meaningful catalysts, we view FHN as unique as this will be the first time mgmt. provides guidance in 17 months post TD deal break," he said in a note to clients Wednesday.

Shares were last down 1.6%.

CNBC Pro subscribers can read the full story here.

— Alex Harring

The Cboe Volatility Index (VIX), widely considered Wall Street's fear gauge, broke above 20 for the first time since May 4. The move comes as traders fret over U.S. debt ceiling negotiations.

— Fred Imbert, Gina Francolla

The Dow slid more than 100 points to start the session, while the S&P 500 and Nasdaq dipped 0.5% and 0.7%, respectively.

— Fred Imbert

Abercrombie & Fitch shares spiked more than 16% after reporting a surprise profit for the recent quarter and beat expectations on both the top and bottom lines.

The retailer shares adjusted earnings of 39 cents a share and revenue of $836 million. Refinitiv estimates called for a loss of 5 cents a share and revenues of $815 million.

Same-store sales rose 3% during the period. Abercrombie & Fitch lifted its guidance for the fiscal year, saying it now expects net sales to grow between 2% and 4%, versus the previous range of 1% to 3%.

— Samantha Subin

Citigroup said Wednesday it will spinoff its Mexico business via an initial public offering.

The bank said it plans to complete the separation of its Banamex business in the second half of 2024, with an IPO likely to follow in 2025.

A source familiar with the plans told CNBC that Citigroup is still weighing a listing destination, with a dual listing possible.

Shares were last down more than 1% before the bell.

— Sara Salinas, Samantha Subin

Check out some of the companies making headlines in premarket trading Wednesday

First Horizon — The regional bank added 2.3% in premarket trading following an upgrade to buy from hold by Jefferies. The firm said the bank has top-tier capital strength and is at a discount to peers.

Palo Alto Networks — Shares of the cybersecurity rose nearly 5% in premarket trading after Palo Alto Networks reported a fiscal third quarter that topped analyst estimates. Palo Alto's fourth-quarter earnings guidance was also higher than expected.

Kohl's — The retailer popped more than 13% after reporting better-than-expected results and a surprise profit for the recent quarter. Kohl's also reiterated previous guidance.

Read the full list here.

— Brian Evans

Ark Invest's Cathie Wood bought the dip in her growth darling Zoom Video on Tuesday as shares of the online conferencing company dropped more than 8% following its quarterly earnings.

Wood's flagship Ark Innovation ETF added 230,964 shares of Zoom, and she also scooped up 36,168 for ARK Next Generation Internet ETF, according to Ark's daily trading data. These purchases were worth more than $17.5 million based on Zoom's Tuesday close of $65.65.

Zoom is ARKK's second biggest holding, with a 7.5% weighting. The stock is down about 3% this year.

While Zoom beat Wall Street expectations for both earnings per share and revenue, Zoom's expectations for the current quarter were only in line with expectations, according to Refinitiv.

— Yun Li

Copper fell on Wednesday to trade near its lowest level since November 28.

The metal hit a low of 3.5855, and is down 7.6% since the start of may. Copper is on pace for its worst month since June 2022, when it lost 13.64%.

Elsewhere, nickel and aluminum traded near their lowest levels since September and October, respectively.

The SPDR S&P Metals & Mining ETF is down 4.8% so far in May and on pace for a fourth consecutive losing month. Downside leaders include Peabody Energy, Carpenter Technology, and Newmont Mining, all down at least 10%.

— Gina Francolla, Samantha Subin

Shares of Kohl's popped more than 12% before the bell after the retailer reported a surprise quarterly profit.

The company reported earnings of 13 cents a share on $3.36 billion in revenue. Analysts polled by Refinitiv expected a loss of 42 cents and $3.34 billion in revenue.

Kohl's also reaffirmed its guidance for the full year, saying it expects net sales to decline between 2% and 4%.

— Melissa Repko, Samantha Subin

Mortgage applications to buy a home dropped 4% last week and 30% over the year-ago period, according to the weekly survey from the Mortgage Bankers Association.

Meanwhile, demand for mortgage applications fell 4.6% from the previous week. The weekly average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances also moved higher.

— Diana Olick, Samantha Subin

Negotiators for both sides of the debt ceiling talks were expected to meet again on Wednesday morning, Reuters reported, citing a source familiar.

Stocks fell on Tuesday after negotiators for President Joe Biden and House Speaker Kevin McCarthy appeared to not make significant progress in talks that day.

It could take a week to write any deal and pass it through Congress, the Reuters report stated, raising the stakes to reach an agreement in the next couple days ahead of a June 1 deadline for default from the Treasury.

— John Melloy

European stocks were sharply lower early Wednesday, with the benchmark Stoxx 600 index down 1.4% and all sectors and major bourses trading in the red.

Auto stocks fell 2.3% and mining dropped 2.25%. France's CAC 40 was down 1.54%, with the U.K.'s FTSE 100 and Germany's DAX lower by 1.4% and 1.3%, respectively.

— Jenni Reid

The Reserve Bank of New Zealand increased its benchmark policy rate by 25 basis points to 5.5% on Wednesday. This is its 12th straight rate hike since October 2021, and in line with expectations from economists polled by Reuters.

The New Zealand dollar strengthened 0.96% against the greenback to trade at 0.6185.

"With the Bank having revised down its near-term forecasts for both headline inflation and the output gap, we do think there's a good chance its hiking cycle is now over," Abhijit Surya of Capital Economics said in a note after RBNZ released its rate decision.

— Lim Hui Jie and Clement Tan

Shares of Alibaba in Hong Kong tumbled as much as 2.7% at the open. The Chinese e-commerce giant is one of the top losers on the Hang Seng Index today.

CNBC reported Tuesday the company is cutting 7% of the workforce in its cloud computing division as the unit gears up for an initial public offering.

The move will see the Chinese tech giant offer severance packages to those affected, the source told CNBC, adding that Alibaba has started informing staff of the layoffs and will be helping those affected move to different positions internally if they desire.

— Lim Hui Jie, Arjun Kharpal

Business sentiment at Japanese manufacturers turned positive for the first time this year, the Reuters Tankan survey for May showed.

The Reuters Tankan survey is similar to the quarterly Tankan survey conducted by the Bank of Japan, with the BOJ's Tankan survey used to formulate Japan's monetary policy.

The sentiment index for big manufacturers stood at +6, up from April's figure of -3. A reading above 0 represents a favorable sentiment, while a number below 0 represents unfavorable sentiment.

Separately, sentiment in Japan's services sector hit a five-month high, with the the Reuters Tankan poll showing a reading of +25, its joint highest level since February 2020.

— Lim Hui Jie

Tax refunds were lower this spring than last, and the impact is starting to show up in companies' quarterly results.

The average tax refund was $2,812 for the week ending May 12, down 7.3% from the year-ago period, according to the Internal Revenue Service. That decline ties back to the elimination of certain tax credits after pandemic-era relief expired. Retailers are seeing the impact: Foot Locker pointed to "lower income tax refunds" as a factor in its sales decline.

For Intuit and H&R Block, however, the impact is a little different. Both suggested that since there are no longer stimulus payments, fewer people are filing taxes – and that's bad news for companies that provide tax prep software.

Indeed, total returns received by the IRS totaled about 142.6 million, down 1.2% from a year ago.

-Darla Mercado, Robert Hum

Copper is down 6.07% in May, putting it on track for its worst month since June 2022, when it lost 13.64%. The metal has lost 4.09% year to date.

LME Zinc hit a low of $2,346 per metric tonne during Tuesday's main trading session, reaching its lowest level since Oct. 7, 2020.

— Hakyung Kim, Gina Francolla

Check out the companies making headlines in extended trading.

Palo Alto Networks — Shares gained 3.5% after the company's fiscal third-quarter earnings and revenue topped estimates. The cybersecurity company posted adjusted earnings of $1.10 per share and revenue of $1.72 billion. Analysts polled by Refinitiv had estimated earnings of 93 cents per share and $1.71 billion in revenue. The company's earnings guidance for the fiscal fourth quarter also surpassed expectations. 

Urban Outfitters — The clothing retailer's stock popped 6%. Urban Outfitters' posted earnings of 56 cents per share in the first quarter. Analysts had expected 35 cents earnings per share, according to Refinitiv. Revenue also beat expectations, with the company reporting $1.11 billion versus consensus estimates of $1.09 billion. 

Toll Brothers — Shares gained more than 3% after the company's fiscal second-quarter earnings and revenue beat analysts' estimates. The company said the increase in demand that started in January has continued into the start of its third quarter.

The full list can be found here.

— Hakyung Kim

U.S. stock futures opened little-changed Tuesday night.

Dow Jones Industrial average futures climbed 22 points, or 0.07%. S&P 500 futures gained 0.07%. Nasdaq 100 futures also rose 0.07%. 

— Hakyung Kim