S&P 500 turns flat after Fitch warning; Merck boosts Dow

A Wall Street sign is pictured outside the New York Stock Exchange in New York, October 28, 2013. REUTERS/Carlo Allegri

  • Merck rises on positive COVID-19 pill data
  • Coty gains on 9% stake sale in Wella to KKR
  • Indexes: Dow rises 0.36%, S&P flat, Nasdaq down 0.37%

Oct 1 (Reuters) – The S&P 500 pared early gains on Friday after Fitch warned that political wrangling over the U.S. debt limit could hurt the country’s credit rating, while drugmaker Merck supported the Dow on marking progress in developing an oral COVID-19 drug.

Fitch said debt limit “brinksmanship”, referring to extended bipartisan talks over raising the spending cap, could put pressure on the United States’ ‘AAA’ rating.

President Joe Biden signed a measure to continue funding the government through Dec. 3, although congressional Democrats and Republicans continued brawling over raising the debt ceiling beyond $28.4 trillion to avert a U.S. credit default read more

“It’s unfortunate when Congress uses this as a negotiating tactic, it’s a bad scenario overall,” said Randy Frederick, managing director of trading and derivatives for Schwab Center for Financial Research.

“Eventually, foreign creditors might be unwilling to buy U.S. debt and if that happens, rates are going to go sharply higher and if rates shot up because people were unwilling to buy treasuries that would have a very negative impact on the market.”

Shares of Merck & Co Inc (MRK.N) jumped 8% and were the top boost to the Dow (.DJI) after the company’s experimental oral drug for COVID-19, molnupiravir, reduced by around 50% the chance of hospitalization or death for patients at risk of severe disease in a study. read more

“The market is viewing this as a very positive development as it gave people confidence that the reopening is not going to get derailed despite breakthrough cases with vaccines,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York.

Six of the 11 major S&P sectors advanced in early trading, with economy-sensitive energy (.SPNY), industrials (.SPLRCI) and materials (.SPLRCM) rising the most.

Cruiseliners (CCL.N), (RCL.N) and (NCLH.N) jumped more than 3%, while the S&P 1500 Airlines sub-index (.SPCOMAIR) added 4.2% on hopes of a faster rebound in travel demand.

Wall Street ended sharply lower on Thursday and the S&P 500 posted its worst month since the onset of the global health crisis, following a tumultuous month and quarter wrecked by concerns over COVID-19, inflation fears and budget wrangling in Washington.

Data showed U.S. consumer spending increased more than expected in August, while the personal consumption expenditure index, a preferred inflation gauge for the Federal Reserve, maintained its upward trend through the month. read more

At 9:58 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 122.89 points, or 0.36%, at 33,966.81, the S&P 500 (.SPX) was down 0.59 points, or 0.01%, at 4,306.95, and the Nasdaq Composite (.IXIC) was down 53.71 points, or 0.37%, at 14,394.88.

Cryptocurrency-linked stocks rose as bitcoin rallied after Fed Chair Jerome Powell said the United States had no plans to ban cryptocurrencies.

Coty Inc (COTY.N) gained 5.7% after agreed to sell ~9% stake in professional beauty business Wella to KKR & Co Inc (KKR.N). read more

Advancing issues outnumbered decliners by a 1.49-to-1 ratio on the NYSE and by a 1.17-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and five new lows, while the Nasdaq recorded 20 new highs and 62 new lows.

Reporting by Devik Jain and Medha Singh in Bengaluru; Editing by Maju Samuel

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