Debt Ceiling and Inflation Worries Trigger Stock Market Decline
The ongoing standstill on the debt ceiling is affecting the stock market with investors closely watching developments. Just this Tuesday, the stock market closed lower with the S&P 500 (^GSPC) slipping 0.64%, the Dow Jones Industrial Average (^DJI) dipping 0.74% or more than 50 points, and the Nasdaq Composite (^IXIC) falling 0.63%.
Another effect of the country’s looming default, almost 50% of US banks are tightening their lending standards. This could lead to companies facing difficulties in accessing loans, potentially forcing them to reduce investments and hinder economic growth. JPMorgan analysts warned that the tightening of credit conditions could have a similar effect to a Federal Reserve rate hike.
Economic data also indicated a decline in small-business owner confidence in April, reaching its lowest level since 2013. The decrease in confidence suggests a further slowdown in business investment.
As regional banking volatility continues, on a more positive note, PacWest Bancorp (PACW) shares gained over 2%, reversing losses from earlier in the session, while oil prices rose to $73.54 a barrel.
Meanwhile, Wall Street is eagerly anticipating Wednesday's release of the April inflation report to determine the Federal Reserve's stance on interest rate hikes at the June meeting. The report is expected to show a 5% year-over-year increase in headline inflation. Excluding the volatile costs of food and gas, core prices in April are projected to have risen 0.4% from the previous month and 5.5% from the previous year, according to Bloomberg data.
With far-reaching and impactful consequences such as these, the pressure is on for action to be taken about the country’s debt ceiling. For now, investors and the rest of America keep a watchful eye and wait with bated breath.
How to Buckle Up for This Economic Roller Coaster Ride
For everyday folk, it might be wise to explore investments and new business ventures at a later time. Keep what’s working for you. Explore other job opportunities or more stocks later.
Prices are only expected to go higher. It might also be wise to reserve travel plans for later and invest more time and energy in your home and local community.
Also, consider the internet as an invaluable resource to learn how to repair minor breaks at home and to find possible side hustles.
Contact your local representative to let them know which side you stand on in the Debt Ceiling Debate. This could help our government move in the right direction.
