Wall Street ends higher, dollar climbs on solid data, debt ceiling progress

May 18, 2023
Traders work on the floor of the NYSE in New York

By Stephen Culp

NEW YORK (Reuters) – U.S. stocks rallied and the dollar reached a seven-week peak on Thursday as discount retail giant Walmart Inc raised its sales outlook and strong economic data calmed recession fears while also dampening hopes the Federal Reserve would cut interest rates before year-end.

Investors continued to closely monitor debt ceiling negotiations in Washington for signs that Democrats and Republicans could be inching closer to a deal.

Among the three major U.S. stock indexes, tech shares boosted the Nasdaq to the biggest gain, while healthcare capped the blue-chip Dow’s advance.

Walmart reported better-than-expected quarterly results and hiked its full-year sales forecasts, citing resilient consumer spending and countering this week’s downbeat forecasts from Home Depot Inc and Target Corp.

“Walmart put a nice cherry on top at the end of a solid earnings season for corporate America,” said Ryan Detrick, chief market strategist at Carson Group in Omaha.

Optimism about debt ceiling talks ebbed and flowed, with hopes for a deal that avoids a catastrophic default.

“Traders are tiptoeing through possibility that Washington can get a deal sooner than later,” Detrick added. “We have seen this show before, and Washington does not want to have a default right ahead of a major election.”

“But for some reason, in the U.S. we do like our drama.”

Data showed fewer-than-expected Americans filed initial jobless claims last week, supporting the likelihood of a “soft landing” but also lowering odds that the Federal Reserve will cut interest rates before year-end.

The Dow Jones Industrial Average rose 115.14 points, or 0.34%, to 33,535.91; the S&P 500 gained 39.28 points, or 0.94%, at 4,198.05; and the Nasdaq Composite added 188.27 points, or 1.51%, at 12,688.84.

European stocks closed higher and the German DAX rose to its highest level since January 2022 on optimism about the U.S. debt ceiling talks.

The pan-European STOXX 600 index rose 0.39% and MSCI’s gauge of stocks across the globe gained 0.64%.

Emerging market stocks rose 0.25%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.32% higher, while Japan’s Nikkei rose 1.60%.

The greenback extended its ascent against a basket of world currencies to reach a seven-week high, powered by the economic data and debt ceiling hopes.

The dollar index rose 0.63%, with the euro down 0.62% to $1.0772.

The Japanese yen weakened 0.73% versus the greenback to 138.71 per dollar, while Sterling was last trading at $1.2408, down 0.62% on the day.

The 10-year Treasury yield continued to climb, reaching its highest level since March, after the economic data and hopes for a debt limit resolution.

Benchmark 10-year notes last fell 19/32 in price to yield 3.6534%, versus 3.581% late on Wednesday.

The 30-year bond last fell 18/32 in price to yield 3.9105%, versus 3.878% late on Wednesday.

Crude prices dropped as the U.S. economic data spurred the dollar to a two-month high on growing expectations the Federal Reserve could raise interest rates again in June.

U.S. crude dropped 1.33% to settle at $71.86 per barrel, while Brent settled down $1.10, or 1.43%, at $75.97.

Gold moved in opposition to the dollar, with the precious metal losing some luster as the economic data lowered the likelihood of a Fed rate cut before year-end.

Spot gold dropped 1.2% to $1,957.09 an ounce.

(Reporting by Stephen Culp; Additional reporting by Elizabeth Howcroft and Kevin Buckland in London; Editing by Richard Chang and Leslie Adler)