Wall St climbs on debt ceiling optimism, regional banks rise

By RockedBuzz 5 Min Read
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By Chuck Mikolajczak

NEW YORK (RockedBuzz via Reuters) – U.S. stocks rose sharply on Wednesday, fueled by optimism about a potential $31.4 trillion federal debt ceiling deal and a rebound in regional bank shares that eased fears of a escalation of the industry’s problems.

President Joe Biden and US Congressional Republican top Kevin McCarthy on Wednesday reaffirmed their determination to reach an agreement soon to raise the debt ceiling and avoid an economically catastrophic default.

If a deal is not reached by June 1, the US Treasury said it could start running out of funds to pay government bills, potentially triggering a recession.

A jump in shares of regional banks lifted sentiment, led by a 10.19% rise in Western Alliance Bancorp a day after the bank said deposits grew by more than $2 billion in the quarter ended May 12.

Regional bank KBW climbed 7.28% to post its biggest daily percentage gain since Jan. 6, 2021 to close at its highest level since May 1. The S&P 500 banks index also rose 4.46% for its biggest daily percentage gain since Nov. 10.

“It’s optimism about the debt ceiling. It’s continued optimism, the banking crisis is in the rear view mirror. Every day we go without a new problem, the closer we get maybe to putting it behind us,” said Rick Meckler, partner at Cherry Lane Investments at New Vernon, New Jersey.

“Certainly the catalyst is when you have both Biden and McCarthy say that we’re close to assuming they’re likely to agree to some sort of deal.”

The Dow Jones Industrial Average rose 408.63 points, or 1.24%, to 33,420.77; the S&P 500 gained 48.87 points, or 1.19%, to 4,158.77; and the Nasdaq Composite added 157.51 points, or 1.28%, to 12,500.57.

The gains marked the largest one-day percentage increase for each of the three major indexes since May 5.

Also providing support was a 4.41% increase in Tesla shares following Tuesday’s annual shareholder meeting.

Top boss Elon Musk played down market speculation that he could step down as Tesla CEO, touched on two new mass-market models the company is developing and reiterated that deliveries of its long-delayed Cybertruck pickup will begin this year.

In addition, a source with direct knowledge of the matter told RockedBuzz via Reuters that the EV maker has proposed setting up a factory in India for domestic sales and export.

With the rally, the S&P is once again near the top of a recent trading range, at around 4160, which has acted as a point of resistance. Analysts said it would take a major catalyst like a debt ceiling deal or clarity on the path of interest rate hikes from the Federal Reserve to push stocks much higher.

Recent data pointed to a slowdown in the US economy following a series of rate hikes by the Fed to combat high inflation. This, coupled with recent US debt ceiling negotiations, has focused attention on when the central bank will halt hikes or cut interest rates.

While the market is pricing in a rate cut later this year, recent comments from Fed officials have suggested they aren’t ready to cut rates any time soon.

Retailers Target Corp and TJX Companies Inc expect lower-than-expected quarterly profit despite higher estimates for the first quarter.

Shares of Target rose 2.58%, while TJX companies finished up 0.93% after a choppy session. The earnings, coupled with Tesla’s rally, helped lift the consumer discretionary sector about 2%.

Volume on US stock exchanges was 10.35 billion shares, compared to the average of 10.59 billion for the entire session over the past 20 trading days.

Advancing issues outpaced declining issues on the NYSE by a ratio of 2.95 to 1; on the Nasdaq, a ratio of 2.45 to 1 favored the advanced.

The S&P 500 posted 20 new 52-week highs and 14 new lows; the Nasdaq Composite recorded 69 new highs and 123 new lows.

(Reporting by Chuck Mikolajczak; Editing by Richard Chang)

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