Daily market review
The performance of market indices was mixed today, but there were more positive trends beneath the surface. However, overall market sentiment lacked strong conviction. Market participants remained concerned about the uncertainty surrounding the debt ceiling.
Over the weekend, Treasury Secretary Janet Yellen emphasized in an interview that the debt ceiling has a "hard deadline" in early June. She mentioned that the chances of the US being able to pay all its bills on June 15 without increasing the debt ceiling are quite low. House Speaker Kevin McCarthy, on the other hand, stated that it's possible to reach a deal either tonight or later this week.
President Biden and House Speaker McCarthy are scheduled to meet tonight for further discussions.
Fed officials also provided some insights for market participants. Minneapolis Fed President Kashkari, who is a voting member of the FOMC, stated in a CNBC interview that the decision to pause in June is a close call. He added that if the Fed does pause in June, it doesn't mean the tightening cycle is over. St. Louis Fed President Bullard, a non-voting member of the FOMC, expressed his view that two more rate hikes are needed this year.
The stock market didn't show significant reactions to the above-mentioned catalysts. The major indices remained within narrow ranges throughout the session, with only modest gains or declines. Although the S&P 500 briefly surpassed the 4,200 level a few times, it couldn't sustain that level, which has acted as strong resistance since last August. Similar to Friday, the S&P 500 closed slightly below 4,200 today.
The broader market received some support from gains in mega-cap stocks and a strong performance by bank stocks. Tesla jumped nearly 5.0% without any specific news, while Alphabet, Microsoft, and Meta Platforms all had notable gains.
The SPDR S&P Bank ETF and the SPDR S&P Regional Banking ETF rose 2.4% and 3.2% respectively. This followed the disclosure by PacWest Bancorp that it entered into a loan purchase and sale agreement with a unit of Kennedy-Wilson Holdings to sell a portfolio of 74 real estate construction loans with a principal balance of around $2.6 billion.
Strength in regional bank shares also helped the Russell 2000 outperform other indices, with a 1.2% increase.
The communication services sector of the S&P 500 showed the highest performance among the 11 sectors, primarily driven by gains in Meta Platforms and Alphabet. Real estate and financials were also top performers, while the consumer staples sector closed at the bottom.
In response to the Fed commentary, Treasury yields retreated, with shorter-term yields experiencing more selling pressure. The 2-year note yield rose seven basis points to 4.34%, while the 10-year note yield rose two basis points to 3.71%.
There were no significant economic data releases in the US today.
Notable companies such as Lowe's, BJ's Wholesale, AutoZone, and Dick's Sporting Goods are scheduled to report earnings before the market opens tomorrow.
The 10-year Treasury note experienced a decrease of 2/32, resulting in a yield of 3.71%.
In the NYSE, there were 1,728 advancing stocks and 1,170 declining stocks, with a trading volume of 804 million. On the Nasdaq, 2,768 stocks advanced while 1,652 declined, and the trading volume reached 4.2 billion.
The following industries showed strength: Communication Services, Real Estate, Health Care, and Information Technology. Conversely, Consumer Staples exhibited weakness.
Several factors influenced the market: