NEW YORK (AP) – Wall Street was floating higher on Wednesday, although it remained stuck in the tight range it has held for a month and a half.
The S&P 500 was higher 0.4% in afternoon trading, on pace for the seventh straight week where it moved less than 1%. This would be its longest streak since 2018. The Dow Jones Industrial Average was up 130 points, or 0.4%, at 33,142, as of 11 a.m. ET, while the Nasdaq Composite was higher 0.4%.
The market took some support on hopes that the US government could avoid defaulting on its debt for the first time. House Speaker Kevin McCarthy said late Tuesday that Democrats and Republicans could reach an agreement by the end of the week, although the two sides are far apart.
They are looming a June 1 deadline, which is when the US government can default on its debt unless Congress allows it to borrow more. A default could shake the financial system because Treasuries are seen as the safest possible investment on Earth, and economists say it could cause widespread damage to the economy.
Stocks of companies that get most of their revenue from the federal government, and thus may have a lot to lose if they can’t pay their bills, were trending slightly higher. Lockheed Martin climbed 1%, and Northrop Grumman rose 1.5%.
One of the hanging issues on Wall Street is debt negotiations. Concerns are also high about a possible recession later this year as very high interest rates are meant to keep painful inflation under control.
One of the main positive factors keeping the economy out of recession so far has been resilient spending by American households. They have continued to spend while manufacturing, the US banking system and other parts of the economy have cracked under the pressure of higher rates.
Target offered some potentially encouraging data on the strength of shoppers when it said its profit came in less last quarter than analysts had feared. But it also said it sees softening sales trends from earlier this year, and it didn’t raise its forecast for full-year earnings. Its stock climbed 3.6%.
TJX, the parent company of TJ Maxx and Marshal’s, gained 3% after reporting a better-than-expected profit for the latest quarter. It also raised its forecast for full-year earnings, although its revenue for the latest quarter fell short of Wall Street’s forecasts.
A day earlier, Home Depot raised concerns when it cut its financial forecasts for the year after highlighting broad-based pressures in its business. Walmart is the next big retailer to report its results, and it’s coming on Thursday.
The retailer is among the big US companies to report their profits for the start of the year. Most companies in the S&P 500 posted earnings that beat analysts’ expectations. But they are still on pace to end the second quarter with a decline in profit from year-ago levels.
In addition to the ongoing “profit slump”, pressures in the US banking industry have also raised concerns on Wall Street. Investors are looking for the next potential weak link after three high-profile failures since March.
Banks are struggling with high interest rates, which has caused some customers to pull their deposits in money-market funds and other accounts in search of higher yields. The higher charge in interest rates over the past year has also brought down the value of many loans and bonds from banks.
Western Alliance Bancorp and other small and medium-sized banks have come under a lot of scrutiny, which has led to huge volatility in their stock prices. Western Alliance pared some of its losses after giving an update on its deposit levels as of May 12, along with other data. It jumped 10.1% on Wednesday, though it’s still down 41.6% for the year.
PacWest Bancorp, another bank under heavy scrutiny, rose 11.4% to narrow its losses for the year to 77.8%.
Treasury yields were rising in the bond market. The yield on the 10-year Treasury rose to 3.55% from 3.54% late Tuesday. It helps set rates for mortgages and other important loans.
The two-year yield, which moves higher on expectations of action by the Federal Reserve, rose to 4.13% from 4.08%.
In overseas markets, Japan’s Nikkei 225 rose 0.8% after data showed the world’s third-largest economy growing at its strongest pace since April-June 2022.
Stock indexes fell 2.1% in Hong Kong and were mixed amid minor movements in Europe.
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AP Business Writers Yuri Kagiyama and Matt Ott contributed.
Source: apnews.com
