Alex Morris, president and chief investment officer with F/M Investments, joined Cheddar News to discuss Wednesday's trading session as stocks climbed amid optimism over a potential debt ceiling deal just days ahead of a deadline.
NEW YORK — Wall Street rallied Wednesday on hopes the U.S. government can avoid a potentially disastrous default on its debt.
The S&P 500 climbed 1.2%, with much of the gain coming after President Joe Biden said he's confident "America will not default." The Dow Jones Industrial Average rose 408 points, or 1.2%, while the Nasdaq composite gained 1.3%.
Biden's comments came after House Speaker Kevin McCarthy said late Tuesday that Democrats and Republicans could reach a deal by the end of the week. They're staring down a June 1 deadline, which is when the U.S. government could run out of cash unless Congress allows it to borrow more.
Wednesday's spurt came after a long, listless stretch where the S&P 500 did not move by 1% over a week, up or down, for six straight weeks. That's its longest such stretch since 2019.
Stocks of companies that get much of their revenue from the federal government, and thus may have much to lose if it can't pay its bills, rose Wednesday. Lockheed Martin climbed 2.1%, and Northrop Grumman gained 2.7%.
Worries are also high about a possible recession hitting later this year because of much higher interest rates meant to get painful inflation under control.
One of the main positives for the economy so far has been U.S. households' resilient spending.
The New York Stock Exchange in New York.
Target offered potentially encouraging data on the strength of shoppers when it said its profit fell by less last quarter than analysts feared. However, it said it's seeing softening sales trends early this year, and did not raise its forecast for full-year earnings. Its stock rallied 2.6%.
Western Alliance Bancorp and other smaller and mid-sized banks have drawn scrutiny after three high-profile bank failures since March. Western Alliance recovered some losses after it gave an update on its deposit levels through May 12, among other data. It jumped 10.2% Wednesday, though it's still down 41.6% for the year so far.
PacWest Bancorp, another bank under heavy scrutiny, rose 21.7% to trim its loss for the year to about 75.8%.
All told, the S&P 500 rose 48.87 points to 4,158.77. The Dow gained 408.63 to 33,420.77, and the Nasdaq added 157.51 to 12,500.57.
In the bond market, Treasury yields climbed. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.57% from 3.54% late Tuesday. The two-year yield rose to 4.16% from 4.08%.
Abroad, Japan's Nikkei 225 gained 0.8% after data showed the world's third-largest economy grew at its strongest pace since April-June 2022.
Stocks fell 2.1% in Hong Kong and were mixed amid modest movements in Europe.
