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Stock Market News for May 31, 2023

Wall Street ended mixed on Tuesday as investors closely monitored U.S. lawmakers who are likely to reach a deal on raising the U.S. debt ceiling. Tech stocks once again rallied, helping the broader market but investors also continued to gauge the Fed’s future course of action with its interest rate hike policy. The Nasdaq ended in the green while the S&P 500 remained unchanged. The Dow closed in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) slid 0.2% or 50.56 points to close at 33,042.78 points.

The S&P 500 rose 0.002% or 0.07 points to end at 4,205.52 points. Tech and consumer discretionary stocks were the biggest gainers, while consumer staples and energy stocks were the worst performers.

The Technology Select Sector SPDR (XLK) and the Consumer Discretionary Select Sector SPDR (XLY) gained 0.5% and 0.7% respectively. The Consumer Staples Select Sector SPDR (XLC) fell 1.1%, while the Energy Select Sector SPDR (XLE) declined 1%. Seven of the 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq climbed 0.3% or 41.74 points to finish at 13,017.43 points, to record its highest close since August 2022.

A total of 11.07 billion shares were traded on Tuesday. Decliners outnumbered advancers on the NYSE by a 1.12-to-1 ratio. On Nasdaq, a 1.21-to-1 ratio favored declining issues.

Lawmakers Reach Deal to Raise Debt Ceiling

President Joe Biden and House Majority Leader Kevin McCarthy, over the weekend, reached a tentative deal to raise the debt ceiling and avoid a default. The Congress will now vote on the legislation, which could be as early as Wednesday.

This comes after Treasury Secretary Janet Yellen warned that if the debt ceiling isn’t raised, the United States could default as early as by Jun 5. Investors are now weighing whether they can sell it to their parties before this day given that after this date the government will exhaust its capacity to pay all its bills.

Although an agreement has been reached after days of negotiations there are still some obstacles. The bill emerging from the deal, Fiscal Responsibility Act, has now gone to the House of Representatives’ Rules Committee. The House will now vote on the deal on Wednesday.

A default will create utter chaos given that there has been growing opposition within the GOP.

Concerns Grow Over Another Rate Hike

Concerns over the chances of another interest rate hike have also been denting investors’ confidence lately. Fresh inflation data showed that the consumer price index once again rose in April after declining in March. This could compel the Fed to go for another rate hike when policymakers meet in June.

Investors were so long hoping that the Fed may finally put a pause on its aggressive rate hikes but that may not be the case.

In spite of the worries, tech stocks rallied on Tuesday, helping the broader market. The tech rally was aided by a jump in the shares of NVIDIA Corporation (NVDA) after the artificial intelligence-related stock briefly went on to join the rare club of companies with a market cap of $1 trillion. NVIDIA has a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Economic Data

In economic data released on Tuesday, the S&P CoreLogic Case-Shiller Indices showed that home prices rose 0.7% in March on a year-over-year basis. Month over month, home prices increased 0.4% in March. The 10-city composite rose 0.6%, while the 20-city composite rose 0.5%.

Separately, the Conference Board said that consumer confidence fell to 102.3 in May, hitting a six-month low. However, it came in above economists’ expectations of 99.

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