The uncertainty surrounding the government’s ability to meet its financial obligations creates a risky environment, but many believe that the markets will ultimately experience an outcome that won’t cause significant damage in the long term.
Ross Stores, Applied Materials Slide
Ross Stores experienced a slight decline in overnight trading despite beating earnings expectations but expressing a cautious outlook. Similarly, Applied Materials saw a 1.4% decrease despite surpassing earnings estimates.
In terms of earnings, the tail-end of the season featured reports from Deere and Foot Locker before the bell. Economic data was limited on Friday. However, market participants anticipated comments from Federal Reserve Chair Jerome Powell and New York Fed President John Williams.
Thursday Recap: U.S. Stocks Rise on Optimism of Debt Ceiling Deal, Walmart’s Upbeat Forecast
U.S. stocks closed higher for a second consecutive day on Thursday, driven by mounting optimism that a U.S. debt ceiling deal could be reached in the near future. This positive sentiment was further reinforced by discount retailer Walmart Inc, which provided additional support with its upbeat annual sales forecast.
The Dow Jones Industrial Average rose 115.14 points (0.34%) to close at 33,535.91, while the S&P 500 gained 39.28 points (0.94%) to end at 4,198.05. The Nasdaq Composite added 188.27 points (1.51%) and finished at 12,688.84. The S&P 500 registered 27 new 52-week highs and seven new lows, while the Nasdaq Composite recorded 88 new highs and 83 new lows.
Optimism Soars: Debt Ceiling Deal Hope
Investor confidence rose as top U.S. congressional Republican Kevin McCarthy expressed optimism about a potential deal to raise or suspend the debt ceiling. McCarthy believes a House vote on the matter could happen next week. President Joe Biden and McCarthy are committed to reaching an agreement soon. They have scheduled discussions for as early as Sunday.
Debt Ceiling Overshadows Fed’s Rate Uncertainty
The debt ceiling issue has dominated headlines, drawing attention away from uncertainty surrounding the Federal Reserve’s stance on interest rates. Economic data showed a larger-than-expected drop in new jobless claims, indicating a tight labor market. This gives the Federal Reserve more leeway to raise rates. However, Fed officials’ comments suggest that they have not yet prepared to reduce or pause rate hikes. Market expectations anticipate a rate cut by year-end, but the Fed’s position appears different.
Walmart’s Strong Earnings Propel Shares
Amidst these developments, Walmart’s first-quarter earnings exceeded expectations. The company also raised its sales and profit outlook. As a result, Walmart’s shares rose by 1.30% to $151.47. Growth stocks such as Synopsys, Netflix, Micron Technology, and Take-Two Interactive Software also performed strongly. This was notable considering the increase in the 10-year U.S. Treasury yield.