All three benchmark U.S. stock indexes concluded the Tuesday trading session lower as the unresolved debt ceiling crisis made investors avoid risk assets like equities.
The Dow Jones Industrial Average finished at 33,055.51, losing 231.07 points or 0.69 percent. The S&P 500, which tracks the stock value of the top 500 American companies, declined by 47.05 points or 1.12 percent to 4,145.58. Meanwhile, the Nasdaq Composite concluded the session at 12,560.24, falling by 160.53 points or 1.26 percent.
The tech sector was among the worst performers for the day, with Microsoft and Alphabet leading the downside. Shares of Microsoft declined by 1.84 percent to $315.26, while Alphabet finished 1.99 percent lower to $122.56. Apple stock also fell by 1.52 percent to $171.56.
Retailers also mostly posted losses, even though Lowe's Companies finished nearly two percent higher after it beat estimates for first-quarter earnings. The home improvement retailer, however, slashed its annual forecast due to weakening demand and lower lumber prices.
Dick's Sporting Goods declined by 1.44 percent to $124.58 despite topping the market's expectations on its first-quarter results. Shares of Walmart also fell by 0.19 percent during the session but later improved after hours.
In the S&P 500, energy was the only sector ending in the green due to the increase in oil prices after the Saudi energy minister projected further production cuts and warned investors against taking bearish positions in the commodity.
Regional banks extended their gains from the previous session, with the KBW regional banking index gaining 0.9 percent. PacWest posted a 7.74 percent increase after the Los Angeles-based lender announced it would sell $2.6 billion of loans to boost finances. Citizens Financial and Zions Bancorporation also jumped 2.50 percent and 4.63 percent, respectively.
Broadcom was also among the few gainers in the session, advancing by 1.20 percent after it signed a multi-billion-dollar deal with Apple to use chips made in the U.S. Yelp stock rose by 5.72 percent after reports suggested that TCS Capital Management purchase a stake in the service-recommendation company. According to sources, TCS is also pushing Yelp to consider strategic options, including a sale.
"We don't have an agreement yet, but I did feel the discussion was productive in areas that we have differences of opinion."
Rep. Kevin McCarthy, speaker of the U.S. House of Representatives
President Joe Biden and House Speaker Rep. Kevin McCarthy met on Monday to discuss the national debt limit, with both sides indicating a positive development in the discussion. Representatives of the administration and Republicans later met on Tuesday but ended the talks without a final agreement. According to sources, lawmakers are still debating about spending cuts. Analysts have said the country's top politicians should conclude the discussion before next month to avoid a default.
Wells Fargo recently published a note saying that the U.S. default risk was low because both parties "have strong incentives to raise the debt ceiling." However, the prolonged debt ceiling debate is expected to increase volatility in fixed-income and stock markets.
Increase in U.S. business activity
Analysts said the rise in U.S. business activity to a 13-month high in May, supported by services, helped limit larger losses in the equity market on Tuesday.
The U.S. Composite PMI Output Index published by the S&P Global rose to 54.5 this month after posting 53.4 in April. The reading marked the fourth straight month that the index posted above 50, indicating growth in the U.S. private sector.
The survey supported the employment report published earlier this month that showed resilience in the labor market, with the nonfarm sector adding 253,000 jobs in April against the initial estimates of 180,000. The upbeat reports made the Atlanta Fed revise its second-quarter gross domestic product estimates to 2.9 percent from 2.6 percent.