Stocks close lower as debt ceiling negotiations continue

Yahoo Finance Live discusses comments made by Federal Reserve Chairman Jerome Powell that interest rates may not have to rise and details how ongoing debt ceiling negotiations are impacting markets.

Video Transcript

AKIKO FUJITA: We were talking earlier today about the comments that we got from Fed Chair Jay Powell, essentially implying that those interest rates may not have to rise as much given some of what we've seen play out in terms of the banks. But today, it certainly felt like it was the debt ceiling that really drove things to the downside.

SEANA SMITH: It certainly was the debt ceiling and we saw that reflected in the intraday moves here. After the debt ceiling talks hit a standstill, that had certainly put pressure on stocks. Congressman Garrett Graves who was Speaker Kevin McCarthy has tapped to lead the talks telling reporters, quote, "It's time to press pause because it's just not productive."

President Biden is in Japan at the G7 Summit. Confidence though that a deal will be reached by the X date is waning. We're seeing that reflected in the market action today.

When we talk about the degree that this is going to impact the markets, that is what is up for debate. Obviously, it's a very serious situation. We've heard a number of economists warn of a doomsday type of scenario. And Akiko, UBS was out with a note today saying that we'll probably drop about 20% in the S&P if we do, in fact, see a default.

AKIKO FUJITA: Now, of course, the president over in Japan. But before his trip over there, it did feel like things were moving in the right direction when you think about what we heard from Speaker McCarthy saying that he doesn't believe the US is going to default on its debt. The President saying there was some progress there.

So today, seeing this pause from the GOP certainly raising questions about where we are as we get closer to the X date. And a reminder here, we're talking about June 1. So just a few weeks out.