Wall Street ends mixed as investors await debt ceiling talks

The oddsmakers are putting a 60/40 chance that an agreement on the debt ceiling will be reached on time. That big news and more inflation data hovering on the horizon later this week, investors are typically staying on the sidelines awaiting more outcome with a flight into mega cap as the new defensive area and fleeing from the traditional cyclicals. Fed comments today still point to another ½ point rate hike which means investors are looking all the more closely at the data points coming later this week. Regional bank stocks were up, larger lenders not so much. As is always the case when big news is coming soon, volume was light at 9.6 billion. 

Mon May 22, 2023  4:01 PM

Wall Street ends mixed as investors await debt ceiling talks

By Saeed Azhar and Shreyashi Sanyal

DJ: 33,426.63  -109.28        NAS: 12,657.90  -30.94        S&P: 4,191.98  -6.07        5/19

DJ: 33,286.58  -140.05        NAS: 12,720.78  +62.88       S&P: 4,192.63  +0.65       5/22

May 22 (Reuters) - Wall Street finished mixed on Monday, helped by gains in Alphabet and Meta Platforms, while some investors refrained from big bets ahead of a fresh round of talks about raising the U.S. debt ceiling.  U.S. President Joe Biden and top congressional Republican Kevin McCarthy were set to meet on Monday to discuss raising the federal debt ceiling, just 10 days before the United States could face an unprecedented default.

"Investors are basically saying, 'We're giving at least a 60:40 likelihood that they will come to an agreement in time,'" said Sam Stovall, chief investment strategist at CFRA Research.  "An agreement could simply be the extension, kicking it down the road to decide on a debt ceiling when they also discuss the budgets in September."

The S&P 500 (.SPX) edged up 0.02% to end at 4,192.63 points.  The Nasdaq Composite Index (.IXIC) gained 0.50% at 12,720.78 points, while Dow Jones Industrial Average (.DJI) declined 0.42% to 33,286.58 points.

Comments by St. Louis Fed President James Bullard on Monday that the Federal Reserve may still need to raise its benchmark interest rate by another half-point this year pushed up the U.S. dollar.  Investors will look for clues on monetary policy from a slew of Fed speakers and key data points this week such as the April personal consumption expenditure (PCE) index and durable goods.  The PCE index reading, the Fed's preferred inflation gauge, is due on Friday.

Technology-related stocks lifted the market, with gains at Alphabet Inc (GOOGL.O) and Meta Platforms Inc (META.O).  "As debt ceiling drama intensifies mega-cap tech stocks have become Wall Street's new favorite defensive trade," said Edward Moya, senior market analyst at OANDA.  Apple Inc (AAPL.O) dropped after Loop Capital downgraded the iPhone maker's stock to "hold" from "buy," its first rating cut in five months according to Refinitiv data.  In a move perceived as ramping up U.S.-China trade tensions, Beijing barred chipmaker Micron Technology Inc (MU.O) from selling memory chips to key domestic industries, sending its shares lower.

Regional banking stocks were lifted by news that PacWest Bancorp (PACW.O) has agreed to sell a portfolio of 74 real estate construction loans to a subsidiary of Kennedy-Wilson Holdings Inc (KW.N).  Pacwest shares surged, while other regional lenders such as Western Alliance (WAL.N) and Comerica Inc (CMA.N) both climbed.  Shares of larger lenders were subdued, with JPMorgan Chase & Co (JPM.N) lower despite the company saying its net interest income will rise $3 billion as interest payments increase from its purchase of failed First Republic Bank this year.  Shares of Greenhill & Co (GHL.N) doubled after Mizuho Financial Group Inc (8411.T) will buy the U.S. M&A advisory firm for $550 million including debt.  Japan's No. 3 lender eyes a bigger share of the world's largest investment-banking fee pool.  Dow component Chevron Corp <CVX.N> dipped after the oil major said it would acquire PDC Energy Inc (PDCE.O) in an all-stock transaction for $7.6 billion, including debt. 

Advancing issues outnumbered decliners on the NYSE by a 1.54-to-1 ratio; on Nasdaq, a 1.74-to-1 ratio favored advancers.  The S&P 500 posted 18 new 52-week highs and nine new lows; the Nasdaq Composite recorded 88 new highs and 78 new lows.

Volume on U.S. exchanges was relatively light, with 9.6 billion shares traded, compared to an average of 10.6 billion shares over the previous 20 sessions.