Debt ceiling optimism helps lift S&P 500, Nasdaq

By Chuck Mikolajczak

NEW YORK (Reuters) – The Nasdaq and S&P 500 indexes advanced on Thursday on continued optimism that a U.S. debt ceiling deal would be reached within days, with discount retailer Walmart (NYSE:) Inc providing additional support after an upbeat annual sales forecast.

The benchmark rebounded from early declines on news that top U.S. congressional Republican Kevin McCarthy said a deal to raise or suspend the debt ceiling could potentially be reached in time to hold a House vote next week.

On Wednesday, President Joe Biden and McCarthy reiterated their aim to strike a deal soon to raise the $31.4 trillion federal debt ceiling and agreed to talk as soon as Sunday.

“The market is overwhelmingly sensitive to changes on the debt ceiling in terms of earlier in the week there was concern that a deal wouldn’t be reached, markets were down, but subsequently everybody’s come out and said they are confident that we won’t default and a deal with be reached,” said Michael Arone, chief investment strategist at State Street (NYSE:) Global Advisors in Boston.

“Markets have taken politicians at their word and have moved reasonably higher on faith that that’s the likely outcome.”

Walmart shares gained 1.01% at $151.05 after the retail giant reported better-than-expected first-quarter earnings and boosted its 2023 sales and profit outlook.

The debt ceiling has drawn attention away from uncertainty about the Federal Reserve’s stance on interest rates.

Economic data showed the number of Americans filing new claims for jobless benefits fell more than expected last week, suggesting the labor market remains tight, giving the Fed more cushion to continue raising rates.

Recent data has indicated some slowing in the U.S. economy following a string of Fed rate hikes to fight high inflation. But while the market is pricing in a rate cut by the end of the year, comments from Fed officials suggested they are not yet ready to cut, or even pause hiking rates, soon.

Dallas Federal Reserve Bank President Lorie Logan and Fed Governor Philip Jefferson said on Thursday the economy does not appear to be softening fast enough for the central bank to pause its rate hike cycle.

Despite another rise in the , growth stocks advanced 0.54%, led by a 7.85% jump in Synopsys (NASDAQ:) shares after its second-quarter earnings results and forecast.

Netflix Inc (NASDAQ:) surged 9.80% after saying its recently launched ad-supported tier reached nearly 5 million active users per month.

Chipmaker Micron Technology Inc (NASDAQ:)’s shares gained 4.11% as it plans to invest up to 500 billion yen ($3.70 billion) in Japan for new chips over the next few years.

“It is strange in that on a day like today, or this week, with some tough talk from Fed officials and rates climbing, yet tech stocks continue to be leadership, to me that is a bit of a head scratcher,” said Arone.

Take-Two (NASDAQ:) Interactive Software Inc jumped 13.16% as it beat estimates for quarterly adjusted sales.

Declining issues outnumbered advancers on the NYSE by a 1.12-to-1 ratio; on Nasdaq, a 1.17-to-1 ratio favored decliners.

The S&P 500 posted 23 new 52-week highs and seven new lows; the recorded 77 new highs and 74 new lows.