The debt ceiling saga is still underway despite market expectations of its completion. The suspense keeps investors on edge. So, the stock market is trading cautiously due to a variety of risks: the looming default, stubborn inflation, recession fears, and the long-lasting standoff between the US and China.

Despite optimism, the US stock market closed the week in the red.The Dow Jones slipped by 109 points or 0.33%. The Nasdaq dropped by 0.24%. The S&P 500 closed almost flat. It was 6 points or 0.14% down to close at 4,191.
The benchmark stock indices traded quietly in the New York pre-market, though they managed to reverse upwards. Futures on the stock indices climbed by 0.06-1.2%. The S&P 500 is expected to trade in the corridor between 4,150 and 4,240.
Wall Street was spooked by the news on the talks about the US debt ceiling. The earlier optimism about the deal was dampened by the news that the talks were halted.
Investors were also trying to puzzle out the Fed’s agenda for further policy moves. Jerome Powell was uncertain that the extra rate hike would be appropriate because the central bank was still evaluating the impact of the previous rate hikes.
Another catalyst for worsening sentiment was the statement by Treasury secretary Janet Yellen. She told US bank top executives that more bank mergers could be necessary after a series of bankruptcies.
The regional bank index fell by 2.17% intraday on Friday. Morgan Stanley shares dropped by 2.66% after CEO James Gorman announced that he would resign in the next 12 months.
Foot Locker shares plummeted after the footwear retailer downgraded its annual sales and revenue forecasts. The warning affected the Dow Jones. Nike shares declined by 3.46%. Under Armour shares closed 4.20% down.
All in all, the Dow Jones rose by 0.38% last week. The S&P 500 climbed by 1.65%. The Nasdaq gained 3.04%. The S&P 500 and the Nasdaq logged the strongest weekly gains since the last week of March.
Futures on the stock indices edged down on Monday but tried to gain ground after the opening bell. The reason is China’s ban on Micron which rekindled the standoff between Beijing and Washington.
China banned the major chip maker Micron Technology from selling memory chips to the country’s key industries. As a result, Micron shares slumped by 5% in the pre-market. In turn, shares of other chip manufacturers such as Intel, Nvidia, and Advanced Micro Devices also dropped by 0.4 – 1.5%. Besides, Alibaba shares tumbled by 5% before the opening bell.
The debt ceiling drama also made its impact on market sentiment. President Joe Biden and House speaker Kevin McCarthy will meet on Monday for further talks. They had a phone conversation at the weekend with a positive result.
Previously, it was proposed to reduce the deficit by nearly 3 trillion dollars through spending cuts and revenue increases. President Biden announced at a press conference that his latest budget proposal would result in more than a trillion dollars in extra spending cuts.
With only nine days left to hammer out a deal before cash shortages lead to default, Treasury Secretary Janet Yellen insisted that June 1 remains a "hard deadline" for raising the federal debt limit and said the chances that the government will raise funds are quite low.

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