4:14pm: Regional banks make major gains
The Dow closed Wednesday up 409 points, 1.2%, at 33,421, the Nasdaq Composite climbed 158 points, 1.3%, to 12,501 and the S&P 500 added 49 points, 1.2%, to 4,159. The small-cap Russell 2000 index rose 39 points, 2.3%, to 1,776.
The benchmarks soared in the afternoon on optimism that the debt-ceiling talks between President Joe Biden and House Speaker Kevin McCarthy would lead to a deal.
"I’m confident that we’ll get the agreement on the budget, that America will not default,” Biden said Tuesday. The president canceled the second leg of a planned international trip to focus on negotiations.
Regional bank shares also did well, thanks to Western Alliance Bancorp's announcement that its deposits have increased since the end of the first quarter. Its shares, along with PacWest Bancorp, Comerica Incorporated and Zions Bancorp all jumped more than 10%.
12.05pm: Stocks rebound as debt ceiling discussions heat up
US stocks were higher in noon trading on investor hopes that the debt-ceiling talks will result in a breakthrough.
At midday, the Dow gained 205 points to 33,217, while the S&P 500 added 23 points at 4,133 and the tech-heavy Nasdaq rose 68 points to 12,411.
“They’re not really giving any kind of a clue as to which way they’re likely to break, meaning favorably or negatively,” CFRA Research chief investment strategist Sam Stovall said.
We’re still in an up channel for the S&P 500. But I think we are in search of a catalyst to either break out or break down,” he added.
Notable movers included shares of Tesla Inc, which climbed more than 4% on investor optimism following the electric vehicle maker’s annual shareholder meeting.
9:40am: Housing starts rise in April
The three major US indexes started the day higher after posting losses on Tuesday amid optimism that political leaders would successfully negotiate a path forward on the country’s debt limit.
Just after the market opened, the Dow Jones had added 154 points or 0.5% at 33,166 points, the S&P 500 was up 19 points or 0.5% at 4,129 points, and the Nasdaq had gained 40 points or 0.3% at 12,383 points.
Meanwhile, April housing starts appear to be stabilizing thanks to falling construction costs and a lack of existing homes, according to Pantheon Macroeconomics senior US economist Kieran Clancy.
Housing starts rose 2.2% in April to 1.401 million, slightly above the consensus expectation of 1.4 million, while building permits fell by 1.5% to 1.416 million, slightly below the expected 1.437 million.
“The bigger picture here is that residential construction is now stabilizing, after being a huge drag on fixed investment in 2022,” Clancy said.
“That said, any rebound in residential fixed investment will be swamped by a plunge in business capital spending; we expect total real fixed investment to fall by 4% and 3% in 2Q and 3Q, respectively.”
7:50am: Equities on edge
US stocks are expected to edge higher at the start on Wednesday after falls in the previous session as investors continue to eye developments in the negotiations between congressional leaders and President Joe Biden on the US debt ceiling.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were up 0.4%, while those for the S&P 500 gained 0.3%, and contracts for the Nasdaq-100 added 0.2%.
Concerns over a potential US debt default weighed on Wall Street on Tuesday, with the DJIA posting a 1% drop, while the S&P 500 shed 0.6% and the Nasdaq Composite lost 0.2%.
The White House said that President Biden has directed staff to meet daily on the outstanding issues over the debt ceiling and that the president has also cancelled the second leg of an upcoming international trip given the negotiations.
Treasury Secretary Janet Yellen, meanwhile, reiterated her warning that the government needs to raise the debt limit immediately as the country faces the possibility of defaulting as early as June 1.
In addition to tracking the debt ceiling negotiations, investors will also watch for data on housing starts and building permits on Wednesday.
TickMill Group’s market analyst, Patrick Munnelly commented: "US data is expected to shed light on the performance of the housing sector. March data revealed a notable decline in permits issued during that month, which is likely to have a dampening effect on housing starts activity in April, with a projected decline of 1.4%.
"However, when considering the broader picture, reports indicate low housing inventories and indications of stabilization in home sales and prices. These factors suggest that the recent upswing in underlying activity may have room for further growth. Consequently, investors expect an increase in building permits for the month of April."
On the corporate front, retailers Target and TJX are both slated to report quarterly earnings Wednesday morning.