Wall Street Holds Before US Default Talks

NEW YORK (AP) -- Stocks are moving tentatively Monday, as Wall Street waits to see whether a pivotal meeting in the afternoon will help the U.S. government avoid a potentially disastrous default on its debt.

The S&P 500 was 0.2% higher in early trading after coming off its best week since March. The Dow Jones Industrial Average was down 17 points, or 0.1%, at 33,409, as of 9:45 a.m. Eastern time, while the Nasdaq composite was 0.4% higher.

The stock market is near its highest level since August, but it's been mostly drifting within a tight range for weeks as several big worries weigh. The biggest near-term risk is the possibility of a U.S. default, something that could occur as soon as June 1.

That's when Washington could run out of cash to pay its bills, unless Congress increases its credit limit and allows it to borrow more. Because Treasurys are widely seen as the safest investment on Earth, economists and investors say a default would likely trigger a recession for the economy and deep pain for financial markets.

President Joe Biden and House Speaker Kevin McCarthy are set to meet in the afternoon at the White House about raising the debt limit. Talks so far have been start and stop, with stocks rallying in the middle of last week on hopes that a deal may be progressing, only to falter Friday when negotiations hit a roadblock. Talks continued through the weekend.

Another worry that's hung over the market is the strength of the U.S. banking system, which has begun to crack under the weight of much higher interest rates. Three big U.S. failures have shaken confidence since March, and investors have been on the lookout for the next possible weak link.

Much scrutiny has been on PacWest Bancorp. Its stock rose 7.7% after it said it agreed to sell a portfolio of real-estate construction loans with about $2.6 billion in principal still outstanding to Kennedy Wilson, among other assets.

PacWest is one of the smaller and mid-sized regional banks that Wall Street highlighted as it hunted for the next possible bank to suffer a drop in confidence. Other banks collapsed after depositors pulled their cash all at once to create debilitating runs. PacWest's stock is still down 73% for the year so far.

Elsewhere on Wall Street, Micron Technology dropped 3.2% as tensions over computer security worsen between China and the United States. China's government said on Sunday Micron's products have unspecified "serious network security risks" that could affect national security. It told users of sensitive computer equipment to stop buying Micron products.

Meta Platforms rose 1.5% after shaking off news that European regulators hit it with a record $1.3 billion privacy fine and ordered it to stop transferring users' personal information across the Atlantic by October. Meta called the decision flawed and unjustified. It said it would appeal.

Meta has been on a tear this year, more than doubling so far in 2023 already. Other Big Tech companies have also had powerful leaps, much stronger than the rest of the market.

But that split in performance, which has kept the overall S&P 500 resilient when many stocks are weakening, is worrying some market watchers. It's left the index looking historically top heavy, meaning its performance is more dependent on just a handful of stocks than it's been in decades.

In the bond market, the 10-year Treasury yield ticked up to 3.69% from 3.68% late Friday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.31% from 4.28%.

In stock markets abroad, Japan's Nikkei 225 rose 0.9% to continue a big run over the last couple weeks. Data for machinery orders released Monday showed a slowdown in the world's third-largest economy, but analysts think a recovery is coming during this quarter.

The Hang Seng in Hong Kong rose 1.2%, while stock indexes were flat to modestly lower across Europe.