Stock Jump on Hopes of Deal on Debt Limit

Target rises 2.6% after reporting encouraging figures
By Newser Editors and Wire Services
Posted May 17, 2023 3:44 PM CDT
Stocks Rise on Hopes of Debt Ceiling Deal
Speaker of the House Kevin McCarthy is joined by Republicans from the Senate and the House as he leads an event on the debt limit negotiations at the Capitol in Washington, Wednesday, May 17, 2023.   (AP Photo/J. Scott Applewhite)

Wall Street rose Wednesday along with hopes that the US government can avoid a default on its debt. The S&P 500 rose 48.87 points, or 1.2%, to 4,158.77. The Dow Jones Industrial Average rose 408.63 points, or 1.2%, to 33,420.77. The Nasdaq composite rose 157.51 points, or 1.3% to 12,500.57. Much of the gain came after President Biden said he’s confident of reaching a deal with Republicans. Washington faces a June 1 deadline when the US government could run out of cash. Also boosting confidence was Target, which reported stronger profit than expected. That eased worries about the financial strength of US households. Several beaten-down banks also rose to recover some of their big losses from earlier in the year.

Wednesday’s spurt comes 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, the AP reports. That’s its longest such stretch since 2019. Congress has raised the nation’s debt limit many times in the past, and most have occurred without much impact on the stock market, according to Chun Wang, senior research analyst at Leuthold. The fear is something similar to 2011 occurring. That’s when Standard & Poor’s cut its credit rating for the US government as it dithered in raising the debt limit. The downgrade coincided with a debt crisis flaring in Europe, and they together sent Wall Street on a neck-snapping roller coaster for a week.

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 2.6%.

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Target offered some potentially encouraging data on the strength of shoppers when it said its profit fell by less last quarter than analysts feared. But it also said that it’s seeing softening sales trends early this year, and it did not raise its forecast for full-year earnings. Its stock rallied 2.6%. A day earlier, Home Depot raised worries when it cut its financial forecasts for the year after describing pressures across its business. Walmart is the next big retailer to report its results, and it’s coming up on Thursday.

(More stock market stories.)

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