Wall Street is falling as markets worldwide are falling

NEW YORK (AP) Stocks continued to fall on Wall Street Wednesday amid concerns that the US is closing in on bankruptcy as inflation continues to weigh on the economy.

The S&P 500 was down 0.8% in afternoon trading. The White House and Congress continue negotiations to avoid a disastrous bankruptcy on US debt. The Dow Jones Industrial Average was down 252 points, or 0.8%, to 32.8033 at 2:17 p.m. Eastern Time, while the Nasdaq composite was down 0.8%.

Other markets around the world were hit even harder as discouraging numbers piled up on the economy. Stock indices plummeted 1.7% in London, 1.9% in Frankfurt and 1.6% in Hong Kong.

Inflation in the United Kingdom remains worse than expected, raising concerns that the Bank of England will continue to raise interest rates and strain its economy. Business confidence fell in Germany in Europe’s largest economy. And in China, concerns remain about a weaker-than-expected reopening due to COVID restrictions as tensions with the United States over technology and safety mount.

On Wall Street, the focus is squarely on Capitol Hill and the White House, where the final battle between Democrats and Republicans threatens to cause the country to default on its debts for the first time. The US government could run out of money to pay its bills as of June 1 unless Congress allows it to borrow more, and the widespread expectation is that a default would lead to massive economic pain.

Nevertheless, the stock market has remained resilient for the most part the worries. The fear has been concentrated in corners of the bond market, where Treasury bill prices have fallen due to the payout around the potential default date.

That’s largely because widespread belief on Wall Street has been Congress would come to an agreement at the 11th hour, as it has been done several times before, because no one would benefit from a default. But fears are mounting that Congress won’t feel the urgency to act unless markets plummet enough to force hands on politicians.

Some level of fear among Wall Street equity investors rose 8.7% and is near its highest level since March. Then concerns flared most strongly about the strength of the banking system, which was creaking under the weight of much higher interest rates.

The rates are so high because the Federal Reserve pulled them up at the fastest pace in decades in hopes of bringing high inflation under control. High rates do this by slowing down the entire economy and hurting prices for stocks, bonds and other investments. That has led many investors to brace for a recession, even if Congress reaches a deal on the debt limit.

Traders are hoping there is only one more hike coming this summer, if any. Federal Reserve officials were divided earlier this month on whether or not to pause their rate hikes at their upcoming meeting in June, the minutes of their May 2 and 3 meeting.

Several companies helped limit losses on Wall Street as they reported stronger results at the start of the year than analysts had expected.

cabbage rose 6.3% after reporting a surprise profit for the last quarter, helped in part by momentum in Sephora beauty stores. Analysts had expected a loss.

Resilient spending by US consumers has helped keep the economy out of recession, even as manufacturing and other areas grapple with higher interest rates. With the job market remaining solid, Goldman Sachs economists expect consumer spending to remain a source of strength for the economy this year.

Homebuilder Toll Brothers rose 1.5% after reporting much better results than analysts had expected for the last quarter.

Most companies have beaten expectations for the first quarter of the year, but that’s largely because analysts have set the bar very low. S&P 500 companies are still on track to report weaker earnings than a year ago for the second quarter in a row.

As a result, Wall Street has focused even more on what companies say about their prospects than on how they’ve performed in recent months.

Agilent Technologies plummeted 6.9% despite stronger earnings and revenue for the last quarter than analysts had expected. It lowered its profit and revenue forecasts for the full fiscal year, saying the market was becoming increasingly challenging.

Analog Devices fell 8.2%, despite last quarter earnings and sales also being stronger than expected. It gave a forecast for current quarter earnings that fell short of analysts’ expectations.

Also on the losing side was Intuit, which lost 7.3%. The company behind TurboTax reported weaker-than-expected earnings for the last quarter.

In the bond market, the yield on the 10-year Treasury rose from 3.70% at the end of Tuesday to 3.71%. It helps set rates for mortgages and other important loans.

The two-year Treasury yield, which moves more based on expectations for Fed action, fell from 4.33% to 4.32%.

AP Business writers Christopher Rugaber, Matt Ott and Joe McDonald contributed.