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Wall Street indexes end sharply higher on optimism about debt ceiling

Published May 26, 2023 06:12AM ET Updated May 26, 2023 08:22PM ET
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© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 19, 2023. REUTERS/Brendan McDermid
 
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By Noel Randewich and Shristi Achar A

(Reuters) - U.S. stocks finished sharply higher on Friday as talks on raising the U.S. debt ceiling progressed, while chip stocks surged for a second straight day on optimism about artificial intelligence.

After several rounds of talks, U.S. President Joe Biden and top congressional Republican Kevin McCarthy appeared to be nearing a deal to increase the government's $31.4 trillion debt limit for two years, while capping spending on most items, a U.S. official told Reuters.

The Dow Jones Industrial Average ended a five-day losing streak, while the Nasdaq Composite Index and S&P 500 closed at their highest levels since August 2022, with the S&P 500 above 4,200 points.

The Philadelphia Semiconductor Index jumped 6.3%, bringing its gain in the past two sessions to over 13%. Building on recent euphoria related to AI, Marvell (NASDAQ:MRVL) Technology Inc jumped 32% after the chipmaker said it would double its annual revenue related to AI.

Investors were closely watching debt ceiling talks as Biden and McCarthy still seemed at odds over several issues heading into the long weekend, with the U.S. stock market closed on Monday for the Memorial Day holiday.

"All the signs point to a deal getting done and this rally being sustained, but if we get through the weekend and we don't have a deal or it falls apart in some way, then we're going to wake up Tuesday morning to some pretty material losses," said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.

Nvidia (NASDAQ:NVDA) Corp's stock climbed 2.5%, adding to its 24% gain on Thursday following its blowout forecast and elevating its stock market value to around $960 billion, according to Refinitiv.

The S&P 500 climbed 1.30% to end at 4,205.45 points.

The Nasdaq gained 2.19% at 12,975.69 points, while Dow Jones Industrial Average rose 1.00% to 33,093.34 points.

Of the 11 S&P 500 sector indexes, eight rose, led by information technology, up 2.68%, followed by a 2.38% gain in consumer discretionary.

Volume on U.S. exchanges was relatively light, with 9.8 billion shares traded, compared to an average of 10.5 billion shares over the previous 20 sessions.

For the week, the S&P 500 rose 0.3%, the Dow fell 1.0% and the Nasdaq jumped 2.5%.

Data showed U.S. consumer spending increased more than expected in April and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.

"We still have inflation, we still have higher interest rates and that will continue to be an overhang for the market until the Federal Reserve goes on the sidelines," said David Sadkin, president at Bel Air Investment Advisors.

Traders now see a 60% chance of a 25-basis-point hike by the Fed in its June policy meet, up from about 40% before the data, according to the CME FedWatch tool.

Ford Motor (NYSE:F) Co jumped 6.2% after the automaker signed a deal allowing customers to access more than 12,000 Tesla (NASDAQ:TSLA) Inc Superchargers in North America in early 2024. Tesla jumped 4.7%.

Ulta Beauty (NASDAQ:ULTA) Inc plummeted 13.4% after the cosmetics retailer cut its annual operating margin forecast.

Paramount Global rallied 5.9% after the media conglomerate's controlling shareholder National Amusements received a $125 million investment.

Advancing issues outnumbered falling ones within the S&P 500 by a 2.2-to-one ratio.

The S&P 500 posted 17 new highs and 15 new lows; the Nasdaq recorded 77 new highs and 115 new lows.

Wall Street indexes end sharply higher on optimism about debt ceiling
 

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Comments (33)
Gothic Serpent
gothicserpent May 26, 2023 3:06PM ET
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Sea of green baby. Plain and simple.
IceIce Baby
IceIceBaby May 26, 2023 2:40PM ET
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Why is this important for the stock market?
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IceIce Baby
IceIceBaby May 26, 2023 2:40PM ET
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tim banks  But why? What does this have to do with Coca Cola shares for example? Will people drink less coke?
tim banks
tim banks May 26, 2023 2:40PM ET
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in the long run yes they drink less coke. well what happens is that the usd is the backing of the entire world market. something like 90% of trades involve it. this puts that in jeopardy. when people don't trust things to happen it upsets markets. the US bond market is 40 trillion dollars.
IceIce Baby
IceIceBaby May 26, 2023 2:40PM ET
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tim banks  thanks
Kommanderr ChickenNugget
Kommanderr ChickenNugget May 26, 2023 2:40PM ET
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It isn't important to the stock market.  The debt limit has been raised 80 times.  It is just used as a negotiating tool by both sides, so it actually serves as a solid check and balance in the US political system.  The US govt actually crashed through the debt ceiling way back in January.  There is no default that arises from the debt ceiling being passed through.  There is only default when the govt doesn't have any money to pay its debt.  That is a ridiculous scenario for a govt that prints its money.  So there will never be a debt-ceiling default.
tim banks
tim banks May 26, 2023 2:40PM ET
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it is important. if you haven't seen the billions in people hedging if an agreement isn't reached. Republicans are driven by ideology these days. not logic. they never minded hurting the usa if it got them elected.
Wen Lin
Wen Lin May 26, 2023 2:36PM ET
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Hopium pump is the nuke
Ricardo Diogo
Rcd72 May 26, 2023 2:35PM ET
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inflation not to talk about much better rumours
Wen Lin
Wen Lin May 26, 2023 2:35PM ET
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Will McCarthy get his spending cap or that cap just got lifted higher to get the deal done?? All smokes for now🤦‍♂️🤦‍♂️🤦‍♂️
Ricardo Diogo
Rcd72 May 26, 2023 2:34PM ET
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losing 📉 credibility these headlines
Jacky Lee
Jacky Lee May 26, 2023 2:28PM ET
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Political show and Wall Street is serious about it. Are you serious? At the end of it, deadlock remains. There will be no deal this month for sure
dylan mulvaney
dylan mulvaney May 26, 2023 2:05PM ET
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"US debt ceiling talks struggle before deadline; 'major issues'"...oh yes, sounds SOOOO hopeful.
Krish da Trader
Krish da Trader May 26, 2023 2:01PM ET
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gonna drop like a rock ..
Jouni Trading
Jouni May 26, 2023 1:58PM ET
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Nsdq 100 up on any hope of anything. No bubble 🤣🤣
 
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