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May 31, 2023Nasdaq Composite books its highest close since August 2022
U.S. stocks finished sharply higher on Wednesday with the Nasdaq Composite logging its highest close since August 2022, buoyed by optimism about a resolution of the debt-ceiling debate in Congress after President Biden expressed confidence about achieving a bipartisan deal, while a bounce in regional bank shares also provided a boost for the major indexes.
How stocks traded?
- The Dow Jones Industrial Average DJIA, -0.15% jumped 408.63 points, or 1.2%, to end at around 33,420.77
- The S&P 500 SPX, +0.00% went up 48.87 points, or 1.2%, to finish at 4,158.77
- The Nasdaq Composite COMP, +0.32% gained 157.51 points, or 1.3%, ending at 12,500.57
On Tuesday, the Dow industrials finished 336.46 points, or 0.1%, lower at 33,012.14, and traded negative year-to-date for the first time since May 4. The S&P 500 closed 26.38 points lower, or 0.6%, to 4,109.90, and the Nasdaq Composite lost 22.16 points, or 0.2%, to 12,343.05.
What drove markets?
Stocks rallied on Wednesday on cautious optimism about a resolution of the U.S. debt-ceiling debate in Congress.
President Joe Biden sounded upbeat Wednesday as a divided Washington continued to work on achieving a bipartisan deal that raises the ceiling for federal borrowing and avoids a market-shaking default.
“I’m confident that we’ll get the agreement on the budget, and America will not default,” Biden said during a brief speech at the White House.
Biden’s remarks underscore earlier comments from House Speaker Kevin McCarthy, who told CNBC in an interview earlier Wednesday that he doesn’t think the U.S. will default on its debt.
See: Biden expresses confidence on achieving debt-ceiling deal: ‘America will not default’
However, James Ragan, director of wealth management research at D.A. Davidson, said stocks could be “vulnerable if we get to an impasse.”
His team noticed that market participants started positioning more defensively due to the weakness in cyclical sectors including energy, materials, and financials, which are leading the market lower this month, but “it’s hard to say if that’s due entirely to the debt negotiations,” Ragan said.
Memorial Day Sale
Treasury Secretary Janet Yellen has warned that June 1 could be the date when the U.S. may become unable to pay its bills in the absence of a debt-ceiling increase.
Concerns about potential impact on markets of a technical U.S. default has helped keep the S&P 500 index confined to a tight range between 3,800 and 4,200 in recent weeks.
“There’s still a lot of uncertainty and the debt ceiling is part of the issue and maybe limiting the upside of the market,” Ragan told MarketWatch in a phone interview. “But even we get through that, our concern is what is it going to take to break the market out of that 4,200 range.”
Peter Cardillo, chief market economist at Spartan Capital, said in a note that the stock averages have not moved out of their trading ranges, which suggests that the market is likely to “trade sideways as the earnings season comes to an end and the focus shifts toward the June 13-14 FOMC [Federal Open Market Committee] meeting.”
See: Western Alliance Bancorp deposit growth sparks rally in bank stocks
Regional bank stocks bounced on Wednesday, with shares of Western Alliance Bancorp WAL, -1.10% ending 10.2% higher after the lender said its deposits grew by $2 billion in the second quarter.
The Invesco KBW regional bank index KBWR, +0.31% finished 7.2% higher and logged its biggest one-day percentage gain since Jan. 6, 2021 when it rose 7.8%, according to Dow Jones Market Data. The SPDR S&P Regional Banking ETF KRE, -0.11% advanced 7.4%.
In U.S. economic data, construction on new homes rose 2.2% in April, as U.S. homebuilders continue to see strong demand from buyers. Housing starts rose to a 1.4 million annual pace last month from 1.37 million in March, the government said Wednesday, meaning that’s how many houses would be built over an entire year if construction took place at the same rate in every month as it did in April. The data roughly matched economists’ expectations on Wall Street.
Companies in focus
- Target Corp. TGT, -3.69% ended 2.6% higher after its fiscal first-quarter profit and sales beat forecasts, but the retailer gave a downbeat second-quarter profit view.
- TJX Companies Inc. TJX, -0.32% stocks were up 0.9% after the parent to T.J. Maxx, HomeGoods and Marshalls stores posted better-than-expected fiscal first-quarter profit but sales that lagged consensus.
- Tesla Inc. shares TSLA, +4.14% rose 4.4% after CEO Elon Musk late Tuesday teased new products, said he will not step down anytime soon and predicted an improving economic environment after an upcoming “year of difficulty” for the global economy.
- Manchester United Ltd. stock MANU, -1.58% rose 1% after Sheikh Jassim Bin Hamad Al Thani on Tuesday made an improved bid for the iconic English football club.
- Shares of WeWork Inc. WE, +4.96% tumbled 24.7% after the office-sharing company announced the imminent departure of its chief executive, garnering a downgrade from Mizuho.
— Barbara Kollmeyer contributed to this article.
