The S&P 500 index showed a modest increase on Monday as investors assessed the progress in debt ceiling negotiations and the rebound in bank stocks following significant losses last week. The Dow Jones Industrial Average remained flat, while the Nasdaq experienced a healthy uptick. The S&P 500 was up by 0.2%, the Dow Jones Industrial Average rose by 4 points, and the Nasdaq increased by 0.6%.
Reports indicating that there has been progress in debt ceiling negotiations have sparked optimism among investors. The ongoing deadlock could be broken soon as U.S. lawmakers are working to raise the Federal budget, preventing the United States from defaulting on its debt. Oppenheimer noted that “efforts to resolve the situation over raising the debt ceiling appear to have been ramped up over the past few days.”
As President Biden prepares to meet with House Speaker Kevin McCarthy and other Congressional leaders on Tuesday, investors will be closely watching for further progress.
Apart from the political developments, investors also kept a close eye on regional banks, which rebounded after last week’s selloff. PacWest Bancorp (NASDAQ:PACW) surged by 9%, while Comerica Inc (NYSE:CMA) and Zions Bancorporation (NASDAQ:ZION) each rose by almost 8%.
Despite the recent tech rally, investors remain concerned about the banking sector following last Friday’s data, which showed that U.S. commercial bank deposits fell for the second consecutive week, and lending activity also decreased after four consecutive weeks of gains.
Robert Conzo, CEO of The Wealth Alliance, emphasized that “Corporate America goes to small and mid-term banks for loans, those loans are going to get harder to get. If companies can’t get loans, or have a harder time getting loans, there’ll be less spending, and the ripple effect goes on.”
Tighter lending standards are likely to curb economic growth and aid the Federal Reserve in its battle against inflation. Conzo added that “This banking turmoil absolutely will do some of the Fed’s work. This story is very much unfolding because there are a lot of banks out there.”
While big tech stocks displayed mixed results, Meta Platforms Inc (NASDAQ:META) rose by more than 1% after Loop Capital upgraded the social media company to Buy from Hold, citing a ‘much brighter revenue picture.’ Meanwhile, Microsoft (NASDAQ:MSFT) rose slightly after European Union regulators approved the company’s proposed $69 billion acquisition of video game publisher Activision Blizzard (NASDAQ:ATVI). C3 Ai Inc (NYSE:AI) experienced a significant surge of over 22% after the artificial intelligence software maker reported fourth-quarter results that exceeded Wall Street estimates.
In economic news, the Empire State manufacturing index for May plummeted more than anticipated, signaling a continuing slowdown in manufacturing activity.
