Stocks extended their downward slide as the debt limit debacle continues to worry investors.
The S&P 500 slid 0.73%, the Dow dropped 0.77% and the Nasdaq Composite gave up 0.61%.
Meanwhile, the Cboe Volatility Index (VIX), which measures investors’ expectations of how volatile S&P prices will be within 30 days, broke the 20-mark barrier. While that figure is the highest since May 4, signaling increased fears and uncertainty in the market, it still isn’t as high as it was during the banking turmoil in March. Investors, then, are fearful, but still hopeful U.S. lawmakers can still reach a deal.
But with exactly a week before June 1 — the date when Treasury Secretary Janet Yellen warned the White House might run out of money to repay its debts — time’s running short.
There have already been consequences. Fitch Ratings just placed the United States’ AAA credit rating on negative watch. Short-term Treasury yields have shot higher recently and are brushing against the 6% mark. If the U.S. defaults and is downgraded, short-term bond prices — which move inversely with yields — could drop even more drastically. (A side note: Long-dated Treasurys tend to increase in price during crises, as investors still see them as a safe asset.)
Dow futures slipped on the credit rating news, but Nasdaq 100 futures jumped on Nvidia’s bright forecast. The semiconductor company added $220 billion to its market capitalization in extended trading — that’s equivalent to the entire market cap of Advanced Micro Devices, noted CNBC’s Robert Hum and Sarah Min. But they also warned investors that Nvidia’s overnight gains might be a mirage, like computer-generated graphics, and vanish in regular trading.
(If only that were the case for the debt limit imbroglio.)
