Dow finishes Tuesday lower as Wall Street weighs odds of debt ceiling deal clearing Congress: Live updates

The Dow Jones Industrial Average fell on Tuesday as Wall Street considered the likelihood of Congress passing a tentative deal on raising the U.S. debt ceiling.

The 30-stock index lost 50.56 points, or 0.15%, to end at 33,042.78. The S&P 500 eked out a 0.002% gain to close at 4,205.52, after trading both above and below the flatline during the session. The Nasdaq Composite added 0.32% to finish at 13,017.43, paring gains after trading up as much as 1.4% earlier in the day.

President Joe Biden and House Majority Leader Kevin McCarthy reached an agreement to raise the debt ceiling and avoid a default over the weekend, with Congress set to vote on the legislation as early as Wednesday. Both Republican and Democratic support is needed for the proposed bill to pass.

The agreement comes just days before the so-called X date on Monday, which is the earliest date the Treasury Department has signaled the U.S. could default on debt obligations. The long negotiations between the White House and congressional leaders raised concern among investors that a default could take place. Despite the tentative agreement, obstacles remain on the path to passage for the compromise bill in the House amid growing opposition within the GOP.

“Markets climb walls of worry at the end of the day, and the debt ceiling is obviously some type of worry,” said Chris Barto, investment analyst at Fort Pitt Capital. “But I think the market is kind of pricing in some sort of deal does get done.”

Concern over the potential for another interest rate hike also weighed on investor sentiment. Traders are pricing in a 68.8% chance of a Federal Reserve rate increase next month, according to the CME Group’s FedWatch tool.

Richmond Fed President Tom Barkin also said at a National Association of Business Economics event Tuesday that he hasn’t “backed off” from his rate forecast, which he said is among the higher ones within the central bank.

“The Fed is still a major focus for all investors,” said Brian Price, head of investment management at Commonwealth Financial Network. “It’s really a tug of war between what the Fed is likely to do: whether or not they are going to hike one or two more times, or just sit tight and wait and see how incoming inflationary data is over the next couple of months.”

The Nasdaq was helped by a nearly 3% rally in Nvidia. The artificial intelligence-related stock reached a $1 trillion market cap — an elite marker surpassed by just a handful of stocks — at one point in Tuesday’s session, as shares continued to rally following its strong earnings report last week.

— CNBC’s Christina Wilkie and Fred Imbert contributed reporting