NEW YORK (AP) — Wall Street ended mixed as a long list of worries loom over the market, even if the most pressing crisis seems to be calming after Washington moved to avoid a default on its debt. The S&P 500 closed virtually unchanged, hovering near its highest level since August. The Dow Jones Industrial Average fell 50 points, or 0.2%. The Nasdaq composite led the market with a 0.3% gain as excitement builds about artificial intelligence. President Joe Biden and House Speaker Kevin McCarthy are working to win votes for a deal reached over the weekend to allow the government to borrow more money.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Wall Street is mixed Tuesday as a long list of worries loom, even if the most pressing crisis seems to be calming after on its debt.
The S&P 500 was virtually unchanged in afternoon trading, hovering close to its highest level since August. The Dow Jones Industrial Average was down 105 points, or 0.3%, at 32,988 with less than an hour remaining in trading. The Nasdaq composite, meanwhile, was leading the market with a 0.5% gain as excitement keeps building about artificial intelligence.
Tuesday marked the U.S. stock market's first trading since President Joe Biden and House Speaker Kevin McCarthy struck a deal to allow the U.S. government to borrow more money, which would let it avoid a default on its debt. They now must convince Congress to approve it before the U.S. government runs out of cash to pay its bills, which could happen as soon as Monday.
Some on Capitol Hill are unhappy about the deal’s details, and Biden and McCarthy are both working to gather votes. The House could vote on the matter Wednesday.
The wide expectation on Wall Street has been for Washington to reach a deal in the 11th hour because failure would likely mean tremendous pain for the economy and financial markets.
But even if there is no default, all of the partisan brinkmanship in Washington leading up to this moment could erode more faith and trust in the U.S. government. That could trigger another downgrade to its credit rating, following Standard & Poor's rating cut in 2011.
Beyond the drama around the nation’s debt limit, financial markets have been battling a long list of concerns. The economy is slowing, inflation is still high and interest rates may be heading even higher, which would further tighten the reins on the economy and financial markets.
The worries are also global, with China’s economic recovery weaker than expected following its relaxation of anti-COVID restrictions.
Still, U.S. stocks have rallied recently after companies reported drops in profit for the start of the year that weren’t as bad as feared. And at the center of it has been Wall Street’s growing frenzy over AI.
Nvidia, whose chips are helping to power the tech world’s newest rush, rose another 3.4% after already more than doubling this year. Last week, it gave a monster forecast for upcoming revenue as it described customers of all kinds racing to apply AI to their businesses.
Nvidia’s surge has its total value near $1 trillion, a threshold passed by only the biggest stocks, including Apple. The huge gains are raising worries about another possible bubble sweeping the stock market. But evangelists say AI is the next big revolution to reshape the global economy.
Also helping to prop up Wall Street in recent weeks have been reports showing a resilient job market and other signals that the slowing economy may avoid a recession.
“I’m sure there’s going to be a lot of money to be made in AI for a select group of companies, but that’s not enough to lift the entire economy out of a potential recession here,†said Rich Weiss, senior vice president at American Century Investments.
He acknowledges the job market has remained much better than he expected under the weight of higher interest rates, but he points to weakness in the housing market, manufacturing, corporate profits and other areas that typically fall before the labor market ahead of a recession.
“The job market will follow the others, not the other way around,†Weiss said.
A report Tuesday morning showed that is falling and remains well below where it was before the pandemic, though it remains stronger than economists expected. That's key because continued spending by households has been one of the main pillars forcing investors to push out their predictions for an upcoming recession by another three to six months.
On the losing end of Wall Street were companies in the energy industry. Exxon Mobil fell 1.5%, and Chevron dropped 0.9%. They dropped as the price of crude oil tumbled amid worries about demand for fuel.
In the bond market, Treasury yields were easing as fears about a possible default diminished.
The yield on the 10-year Treasury fell to 3.69% from 3.81% late Friday. It helps set rates for mortgages and other loans.
The yield on the two-year Treasury slipped to 4.47% from 4.57%. It more closely tracks expectations for what the Federal Reserve will do.
Traders are largely bracing for another hike in short-term interest rates from the Fed at its next meeting in two weeks, but the hope is that may be the final one after more than a year of rapid increases.
Higher interest rates help to slow inflation, but they do that by dragging on the entire economy, raising the risk of a recession and hurting prices for investments.
In markets abroad, European stocks were lower while indexes were mostly higher in Asia.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
