(Wednesday market open) Investors seeking some respite from the current debt-ceiling countdown may find distraction in the Federal Reserve meeting minutes and Nvidia (NASDAQ:) earnings, both due to be released later today.
In the meanwhile, reports of limited progress in Washington caused premarket trading for major indexes to resume their decline on Wednesday. One possible hope for a solution to the impasse is that the business community might step in and put pressure on politicians to avoid default. According to Bloomberg, the White House and House Republicans are set to resume debt-ceiling negotiations today.
Volatility woke up on Tuesday after a prolonged period of lull due to fears over the debt ceiling, and it is likely to continue until a solution is in place. The Cboe Volatility Index®, also known as the “fear index,” rose to 19.6 early on Wednesday, the highest level since May 5.
“If the debt ceiling issue isn’t resolved, then the U.S. risks another debt downgrade and a sharper rise in short-term rates, while risk assets might sell off as they did during the 2011 debt ceiling standoff,” says Kathy Jones, Chief Fixed Income Strategist at Schwab.
Yesterday’s selling put a dent in the high-flying tech sector, which is sensitive to interest rates. If the deadlock continues, this could be the beginning of a larger decline. The defensive parts of the market fared well on Tuesday, indicating that investors might be seeking safe havens, although no investment is entirely risk-free.
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