Stocks Rise on Hopes for Debt-Ceiling Deal -- WSJ

Dow Jones05-27

By Charley Grant

Stocks climbed Friday as a potential deal to raise the debt ceiling began to take shape and a rally in technology shares gained steam, capping a mostly positive week for major indexes.

The tech-heavy Nasdaq Composite led the way, gaining 2.2% as enthusiasm for companies developing artificial-intelligence technologies kept building. The S&P 500 advanced 1.3%, while the blue-chip Dow Jones Industrial Average rose 329 points, or 1%.

The Nasdaq, which is off to its best start in more than 30 years, rose 2.5% for the week, its fifth consecutive week of gains. The S&P 500 ended the week slightly higher, while the Dow dropped 1%.

Details of the debt deal still weren't final as of Friday afternoon. But many investors were confident that an agreement would pass Congress ahead of June 1, the day that Treasury Secretary Janet Yellen has warned the government might not have enough cash to pay all its bills.

"If the market felt the deal wasn't going to get done, we would have started to see a precipitous sell-off by this point," said Brett Bernstein, CEO and co-founder of XML Financial Group.

U.S. government bond yields edged higher Friday, after fresh data showed consumers increased their spending sharply and inflation accelerated in April. The two-year Treasury yield rose to 4.587% from 4.508% Thursday, while the 10-year yield advanced to 3.82% from 3.814%. Bond prices fall when yields rise.

Traders have reduced their bets that the Federal Reserve will cut rates this year, based on futures contracts. The central bank is scheduled to make its next decision on rates policy on June 14.

Investors continued to clamor for chip stocks as a way to bet on a spending boom on artificial-intelligence technology. Marvell Technology rose 32% after reporting earnings that topped expectations. Nvidia rose 2.5%, a day after its stock advanced 24% on the back of a strong forecast.

"We believe the AI hype is far more justified than some of the other tech-hype cycles," such as cryptocurrencies and nonfungible tokens, said Ross Mayfield, investment strategy analyst at Baird. The Nvidia forecast "was almost unprecedented in the magnitude to which it beat expectations. It really shows how immediately monetizable the demand is, " he added.

The PHLX Semiconductor index rose 11% for the week. Tech companies have issued strong capital spending forecasts to build out their own artificial intelligence programs.

That demand surge should support chip stocks in the months ahead, according to Eric Freedman, chief investment officer at U.S. Bank Asset Management Group. "It's a very brave soul that's willing to take the other side of this trade, given current momentum," he said.

Ford Motor shares rose 6.3% after the automaker unveiled a partnership with Tesla on Thursday that will allow Ford's electric-car customers to use Tesla's rapid charging stations. Tesla stock rose 4.7%.

Shares of beauty-product retailer Ulta Beauty fell 13%, the biggest laggard in the S&P 500, after the company reported disappointing earnings and warned of moderating growth.

Write to Charley Grant at


(END) Dow Jones Newswires

May 26, 2023 16:21 ET (20:21 GMT)

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