Stocks fell on Tuesday as ongoing U.S. debt ceiling talks failed to yield a deal, but House Speaker Kevin McCarthy said the negotiations were "productive" late Monday. Traders, however, interpreted the lack of major updates as a sign the deal may not take place before the estimated deadline.
Here's how the market settled on Tuesday:
S&P 500 Index (NYSE: SPY): -1.12% or -47.05 points to 4,145.58
Dow Jones Industrial Average (NYSE: DIA): -0.69% or -231.07 points to 33,055.51
Nasdaq Composite Index (NASDAQ: QQQ): -1.26% or -160.53 points to 12,560.25
Market participants have been keeping a close eye on debt ceiling talks between President Joe Biden and congressional lawmakers for the past several sessions. Concern over a possible default came after U.S. Treasury Secretary Janet Yellen sounded the alarm earlier this month that the economy could be deeply impacted if the country can no longer repay its debts.
Yellen wrote in a new letter to congressional leaders released on Monday that the earliest date the U.S. could default is June 1.
"With an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government's obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1," writes Yellen.
It should be noted that Yellen has updated her language from her previous letter to Congress on May 15 to include "highly likely" instead of the prior "likely" regarding the potential default.
On the economic front on Tuesday, the S&P Global's flash reading of the Purchasing Managers Index (PMI) for manufacturing came in at a lower-than-expected 48.5 in May, while services PMI rose to a more-than-expected 55.1.
Meanwhile, sales of new U.S. single-family homes rose 4.1% to an annualized rate of 683,000 in April, according to the Census Bureau, above March's revised rate of 656,000.
In single-stock news, Apple (NASDAQ: AAPL) announced a new multi-billion dollar deal with Broadcom (NASDAQ: AVGO) to create 5G components in the United States. Through the multi-year deal, the companies will design and build products across several U.S.-based facilities. Apple said the deal is also part of its 2021 plan to invest $430 billion in the U.S. economy.
Looking ahead, market moves will remain tied to updates on the pending debt ceiling deal. Investors will also look for clues on the Federal Reserve's next moves from meetings from the central bank's latest policy meeting set for release Wednesday afternoon.