Stocks opened higher Friday but quickly reversed course after news emerged that Republican lawmakers and White House officials had reached an impasse in debt ceiling negotiations. These headlines overshadowed a relatively dovish speech from Federal Reserve Chair Jerome Powell, with the three main benchmarks ending the day in the red.
Heading into today, stocks had scored back-to-back wins as lawmakers expressed optimism that a deal could be made on the debt limit. But today, Republican negotiators said recent talks were unproductive, with House Speaker Kevin McCarthy indicating spending levels were a major sticking point.
"Markets quickly sank this morning after Republican lawmakers stepped away from the negotiation table, with GOP Representative Garret Graves claiming the White House team was being unreasonable," says José Torres, senior economist at Interactive Brokers. Despite upbeat comments from political party leadership in recent days, "negotiators appear far apart in reaching a compromise," Torres adds.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Also in focus was a late-morning speech from Federal Reserve Chair Jerome Powell. While Powell said the central bank is committed to bringing inflation down to its 2% target, he added that "the risks of doing too much versus doing too little are becoming more balanced." As such, the Fed "can afford to look at the data" as it decides how to proceed with future monetary policy.
Powell also said that interest rates might not have to go much higher after the recent regional banking crisis created tighter lending conditions, which could, in turn, slow the economy. The CME FedWatch tool is currently indicating an 80% chance the central bank will pause its rate hikes at the next Fed meeting in June.
Regional bank stocks stumble
Elsewhere, regional bank stocks tumbled after a CNN report suggested Treasury Secretary Janet Yellen told a group of CEOs that more consolidation is needed within the banking industry. PacWest Bancorp (PACW, -1.9%), Zions Bancorp (ZION, -1.7%) and Western Alliance (WAL, -2.4%) were among those closing lower.
As for the major indexes, the Dow Jones Industrial Average fell 0.3% to 33,426, the S&P 500 shed 0.1% to 4,191, and the Nasdaq Composite gave back 0.2% to 12,657.
Debt ceiling, Nvidia earnings in focus next week
So what's in store for next week? It will be a busy one, that's for sure. The debt ceiling will stay top of mind for investors. Treasury Secretary Janet Yellen said earlier this month that the U.S. could default on its financial obligations as early as June 1 if the debt limit is not raised, and that date is now less than two weeks away.
There is also an onslaught of economic data set to be released – including several updates on manufacturing activity – and a number of speeches from Fed officials. The next Fed meeting is slated for mid-June, so investors are anxious for clues on what the central bank intends to do with interest rates going forward. And the earnings calendar has plenty of notable names to be aware of, including Nvidia (NVDA). While the chipmaker is often seen as one of Wall Street's best semiconductor stocks, updates on its AI initiatives are what investors will be watching for.
-
Fed's Rate Cuts Could Have Impacts You Might Not AnticipateUnderstanding how lower interest rates could impact your wallet can help you determine the right financial moves to make.
-
Past Performance Is Not Indicative of Your Adviser's ExpertiseMany people find a financial adviser by searching online or asking for referrals from friends or family. This can actually end up costing you big-time.
-
I'm want to give my 3 grandkids $5K each for Christmas.You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
AI Stocks Lead Nasdaq's 398-Point Nosedive: Stock Market TodayThe major stock market indexes do not yet reflect the bullish tendencies of sector rotation and broadening participation.
-
Dow Adds 646 Points, Hits New Highs: Stock Market TodayIt was "boom" for the Dow but "bust" for the Nasdaq following a December Fed meeting that was less hawkish than expected.
-
Dow Rises 497 Points on December Rate Cut: Stock Market TodayThe basic questions for market participants and policymakers remain the same after a widely expected Fed rate cut.
-
JPMorgan's Drop Drags on the Dow: Stock Market TodaySmall-cap stocks outperformed Tuesday on expectations that the Fed will cut interest rates on Wednesday.
-
Crypto Trends to Watch in 2026Cryptocurrency is still less than 20 years old, but it remains a fast-moving (and also maturing) market. Here are the crypto trends to watch for in 2026.
-
Stocks Bounce Back With Tech-Led Gains: Stock Market TodayEarnings and guidance from tech stocks and an old-school industrial lifted all three main U.S. equity indexes back into positive territory.
-
Dow Slides 427 Points to Open December: Stock Market TodayThe final month of 2025 begins on a negative note after stocks ended November with a startling rally.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
