Stocks rallied last week, propelled by growing optimism over reaching a deal on raising the debt ceiling and avoiding a technical debt default by the U.S.
Possible debt deal
After stumbling on weak April retail sales and a combination of disappointing earnings and weak guidance from a major retailer, stocks moved higher mid-week as the news on the debt negotiations turned more positive.
The prospect of an agreement helped to lift a cloud of uncertainty that had weighed on markets in recent weeks and sparked sufficient optimism to shake off comments by the Dallas Fed President, who indicated that economic data may not support a pause in rate hikes yet. Aiding the market’s upbeat mood was a positive update on deposit growth at a troubled regional bank.
Stocks surrendered some of the week’s gains on Friday following reports of an impasse on debt talks and comments by Fed Chair Powell.
Recent updates have suggested that the housing market may be staging a turnaround after a long period of contraction. Last week’s data contained some fresh evidence of revival and caution that any potential recovery may remain further out.
The first positive sign was an increase in home builder sentiment that put the National Association of Home Builders Housing Market Index’s confidence level at the midpoint for the first time since July 2022. An unexpected 2.2% rise in housing starts in April followed. These encouraging reports, however, were followed by a disappointing 3.4% decline in April existing home sales.4, 5, 6
Footnotes and Sources
4. National Association of Home Builders, May 16, 2023.
5. Fox Business, May 17, 2023
6. The Wall Street Journal, May 18, 2023
Originally Posted May 31, 2023 – Despite stall, debt deal optimism cheers markets
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