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Stock Market News for Jun 1, 2023

U.S. stocks ended lower on Wednesday as the House headed to vote on raising the federal debt ceiling to avoid a government default, while concerns grew over another interest rate hike in the Fed’s next meeting in June. All three major indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) declined 0.4% or 134.51 points to finish at 32,908.27 points.

The S&P 500 slid 0.6% or 25.69 points to close at 4,179.83 points. Materials, energy, financial and industrial stocks were the worst performers.

The Materials Select Sector SPDR (XLB) and the Energy Select Sector SPDR (XLE) declined 1.1% and 1.8%, respectively. The Financials Select Sector SPDR (XLF) declined 1.1%, while the Industrials Select Sector SPDR (XLI) lost 1.4%. Seven of the 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq lost 0.6% or 82.14 points to end at 12,935.25 points.

The fear-gauge CBOE Volatility Index (VIX) was up 2.75% to 17.94. Decliners outnumbered advancers on the NYSE by a 1.39-to-1 ratio. On Nasdaq, a 1.37-to-1 ratio favored declining issues. A total of 13.87 billion shares were traded on Wednesday, higher than the last 20-session average of 10.58 billion.

Debt Ceiling Deal Awaits House Vote

Stocks ended lower on Wednesday ahead of the crucial vote on the federal debt ceiling deal. The House of Representatives was readying to vote in the evening on a bill to raise the $31.4 trillion debt limit in order to avoid a government default that could come as early as next week.

Investors and analysts were hopeful that a deal will be reached but after facing some delays. A House passage will send the bill to the Senate where another round of debate can be expected which might stretch to the weekend, just before Jun 5 when the government could start defaulting by running out of money.

President Joe Biden said on Wednesday that he expects the federal debt ceiling bill on his desk by Monday morning.

However, investors are speculating as to whether additional changes and time are required before a formal deal can be reached.

Once the deal is reached, investors are expected to shift focus to Fed’s next policy meeting. Investors are unable to gauge if the Fed will continue hiking interest rates or put a pause when the central bank officials meet in June.

Fresh data released on Wednesday showed that U.S. job openings unexpectedly rose in April, indicating that the labor market is still resilient. Also, inflation rose slightly in April after showing signs of easing in the prior month. This may compel the Fed to go for another interest rate hike in its June policy meeting.

This has been denting investors’ confidence. However, on Wednesday, Fed officials said that it might be wise to forego raising interest rates at the central bank's upcoming policy meeting in June. This somewhat helped indexes recover some ground in the late afternoon session.

Financial stocks took a beating on Wednesday. Shares of Bank of America Corporation (BAC) fell 1.7%, while The Goldman Sachs Group, Inc. (GS) declined 1.4%. Bank of America has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here.

Energy stocks also took a hit. Shares of Chevron Corporation (CVX) and Exxon Mobil Corporation (XOM) declined 1.6% and 1.8%, respectively.

Economic Data

The Labor Department reported that U.S. job openings jumped unexpectedly in April to 10.1 million to hit a three-month high. This is yet another indication that the labor market is still going strong and the economy hasn’t cooled enough.

Monthly Roundup

The three major Indexes ended the month mixed. The Nasdaq had a solid month, ending 5.8% higher, driven by a rally in mega-cap tech stocks. The S&P 500 also finished the month 0.2% higher. However, the Dow suffered throughout May, ending the month 3.5% lower. 

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