Stocks rose Wednesday as investors hoped congressional leaders and President Joe Biden could come to a deal on the U.S. debt ceiling and avoid a catastrophic default.
The Dow Jones Industrial Average traded 408.63 points higher, or 1.24%, to 33,420.77. The S&P 500 gained 1.19% to 4,158.77. The Nasdaq Composite advanced 1.28% to 12,500.57.
Stocks close higher Wednesday, Dow surges 400 points as traders grow optimistic on a debt ceiling deal: Live updates
At the conclusion of a meeting between the president and congressional leaders Tuesday, House Speaker Kevin McCarthy said that a “better process” is now in place for further talks, saying it’s “possible to get a deal by the end of the week.” The White House said that Biden canceled a second leg of an upcoming international trip to focus on the negotiations.
“Now we have a structure to find a way to come to a conclusion,” McCarthy said on CNBC’s “Squawk Box” Wednesday. “I think at the end of the day we do not have a debt default. I think we finally got the president to agree to negotiate.”
On Wednesday morning, Biden said from the White House that he and the other lawmakers had a “productive” meeting.
“I’m confident that we’ll get the agreement on the budget, that America will not default,” Biden said.
Concerns over a potential default have weighed on markets recently. The Dow is down about 2% this month, including a 1% decline on Tuesday.
Sam Stovall, chief investment strategist at CFRA Research, said he expects that markets are stuck in neutral, even as the news becomes “more and more optimistic” on the debt ceiling. He cited recent trends in the 10-year Treasury yield, as well as strength indicators in the S&P 500.
“They’re not really giving any kind of a clue as to which way they’re likely to break, meaning favorably or negatively. We’re still in an up channel for the S&P 500. But I think we are in search of a catalyst to either break out or break down,” Stovall said.
Treasury Secretary Janet Yellen has said the government needs to raise the limit immediately as the country faces the possibility of defaulting as early as June 1.
Regional bank shares rebounded on Wednesday, helping market sentiment, as Western Alliance Bancorp recently detailed improving deposit growth. The SPDR S&P Regional Bank ETF (KRE) jumped more than 7%, while Western Alliance soared 10.2%.
Lea la cobertura del mercado de hoy en español aquí.
All top 10 active stocks are in green, Wednesday 2023-05-17. Market recap with financial headlines
A deal on the debt ceiling is ‘right around the corner,’ Pimco says
A deal on raising the debt ceiling between Congressional leaders and President Joe Biden could be closer than previously thought, according to Pimco.
“We think a deal – or a framework of a deal – is right around the corner – and likely in days, not weeks. However, like all negotiations, there is a chance that we could see them die before they are revived, but regardless, we think the destination is clear. Congress will raise the debt ceiling – and likely through the presidential election – meaning that market will not likely have to contend with the debt ceiling until early 2025 (at the earliest, given emergency measures),” Pimco head of public policy Libby Cantrill said in a Tuesday note.
The comments follow optimistic sentiments from both President Joe Biden and House Majority Leader Kevin McCarthy on Wednesday, with both men saying that the U.S. would avoid default despite ongoing negotiations.
— Brian Evans
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