Stock Market News Today: Markets end solidly higher on debt ceiling optimism (SP500)
U.S. stocks ended solidly higher on Wednesday, ending a run of lackluster trading. Sentiment was supported by optimism over the debt ceiling impasse and a jump in shares of regional banks following a positive update by Western Alliance.
The tech-heavy Nasdaq Composite (COMP.IND) ended up 1.28% at 12,500.57 points, while the benchmark S&P 500 (SP500) added 1.19% to close at 4,158.77 points. The blue-chip Dow (DJI) rose 1.24% to settle at 33,420.77 points.
Of the 11 S&P sectors, nine ended in the green, led by Financials and Energy. The former added +2% as regional banks advanced after Western Alliance (WAL) on Tuesday said its quarter-to-date deposit growth had exceeded $2B, calming wider fears over huge outflows. Lenders such as Comerica (CMA), Zions (ZION) and KeyCorp (KEY) were among the top percentage gainers on the S&P 500 (SP500) on Wednesday.
"Earlier in the day, optimism seemed to center around news that Western Alliance Bancorp (WAL) had posted a surprise increase in deposits of more than $2 billion since the end of the first quarter. This implies that the risk facing the institution right now be a thing of the past. And this optimism also served to push up other companies in the banking sector," Daniel Jones, investing group leader of Crude Value Insights, told Seeking Alpha.
"It may seem odd that a small regional bank with a market capitalization of less than $4B could be responsible for a major market move higher. But when you consider that this renewed optimism could put an end to the risk of the banking contagion spreading further, it makes a great deal more sense," Jones added.
Much of the spotlight on Wednesday remained on the debt ceiling impasse. The major averages had ended in the red in the previous session on worries over the standoff.
On Tuesday, U.S. President Joe Biden met for about an hour with House Speaker Kevin McCarthy, Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell and House Minority Leader Hakeem Jeffries.
The White House called the meeting "productive and direct" and reports said that the leaders reached a consensus that defaulting on the debt was "simply not an option." McCarthy told CNBC that he doesn't think a default will happen.
The White House also confirmed a report that Biden would cut short his planned trip to Australia and Papua New Guinea and will return to the U.S. on Sunday to oversee more congressional meetings in order to avoid the so-called X-date of June 1.
"Personally, I always view the risk of a default as incredibly small. After all, going off that cliff would seem unconscionable and it would set the global economy on a path of severe pain. But markets rarely act rationally when uncertainty comes into the mix. So the idea that this default is even less likely naturally adds to the optimism that investors are feeling," Jones said.
Turning to the fixed income markets, Treasury yields were higher. The longer-end 10-year yield (US10Y) was up 3 basis points to 3.58% while the more rate-sensitive 2-year yield (US2Y) was up 8 basis points to 4.15%.
On the economic calendar, April housing starts and building permits came in. Building permits fell 1.5% M/M to 1.416M which was below the consensus figure of 1.437M. Housing starts came in at +2.2% M/M to 1.401M, slightly above the estimated 1.400M number.
Among active movers, Target (TGT) shares ended higher despite the retailer signaling a tougher sales environment ahead.
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Source: Seeking Alpha
