US stocks closed higher on Monday as investors monitored the debt-ceiling standoff, while assessing fresh economic data and Fedspeak.
The benchmark of the S&P 500 (^GSPC) ticked up 0.3%, while the Dow Jones Industrial Average (^DJI) added 0.15%. The technology-heavy Nasdaq Composite (^IXIC) gained 0.66%.
The ticking bomb of a potential debt default by the US government is front and center for investors again this week. President Joe Biden, House Speaker Kevin McCarthy and other congressional leaders are planning to meet Tuesday to resume budget negotiations after postponing talks set for Friday.
Meanwhile, Treasury Secretary Janet Yellen said the discussions are making progress, The Wall Street Journal reported. She plans to meet senior bankers to discuss the debt limit.
JPMorgan Chase & Co. (JPM) CEO Jamie Dimon said the bank has set up a “war room” looking at contingencies if the debt limit isn’t raised in time. Dimon has already warned that markets will be gripped by panic as the US approaches a possible default on its sovereign debt.
Some bearish voices on Wall Street, including Morgan Stanley’s Michael Wilson, have warned that the debt-limit debate could trigger sharp swings in the equity market.
Most clients “believe it will ultimately get resolved, but not without some near-term volatility,” Wilson wrote in a note.
Government bond yields were mixed. The yield on the 10-year Treasury traded up to 3.49%, while yields on the two-year note ticked down to 3.99%. The dollar index edged down following a 1.45% rally last week, its strongest one-week gain since late September of 2022, according to JPMorgan.
The barometer of manufacturing activity in New York State plunged in May in the most in more than 3 years. The regional Fed’s “Empire State” index on current business conditions plummeted 42.6 points to -31.8 this month, data showed Monday.
Separately, Federal Reserve Bank of Atlanta President Raphael Bostic said Monday he does not expect any interest-rate cuts this year due to sticky inflation. Meanwhile, two other Federal Reserve officials signaled that they favored pausing interest-rate increases.
Elsewhere, in Washington, former executives from Silicon Valley Bank and Signature Bank are expected to testify before the Senate on Tuesday.
Meanwhile, earnings season continues with notable companies set to report, including retailers Walmart (WMT), Target (TGT) and Home Depot (HD). China’s tech giants Alibaba (BABA) and Tencent (TCEHY) are also on the docket this week.
Wall Street’s calendar includes monthly retail sales out Tuesday. Economists surveyed by Bloomberg expect the headline print to grow 0.8% in April, up from a 1% drop last month. Some strategists argue that headline figures will likely be boosted by strong auto sales in the month, providing more insight on the state of the consumer.
In single stock moves, Microsoft Corp’s (MSFT) $69 billion takeover of Activision Blizzard (ATVI) got approval from the European Union after regulators in the United Kingdom rejected the same plan.
Magellan Midstream Partners, L.P. (MMP) shares rallied over 13% Monday after pipeline operator ONEOK, Inc. (OKE) agreed Sunday to buy smaller rival Magellan Midstream Partners for about $18.8 billion including debt, forming the second-largest U.S.-based pipeline company by stock-market value.
Shares of SoFi Technologies, Inc. (SOFI) sank 5% after the financial services company got a downgrade as Wall Street remains unsure about the stock. SoFi could be “nearing a tipping point” on the fee income it recognizes from loan applications and sales, warning the fee income could decline significantly, Wedbush analysts said.
C3.ai (AI) stock rallied more than 23% after the artificial intelligence company raised its outlook citing interest in applying predictive analytics “has never been greater.”
