by Chuck Mikolajczak

NEW YORK (Reuters) – The New York Stock Exchange ended sharply higher on Wednesday, buoyed by a surge of optimism that a U.S. debt ceiling deal is likely to be reached, as regional bank stocks rebounded allayed fears of a possible escalation of the crisis in the sector.

The Dow Jones Industrial Average gained 1.24%, or 408.63 points, to 33,420.77 points.

The broader S&P-500 gained 48.87 points, or 1.19%, to 4,158.77 points.

The Nasdaq Composite advanced for its part by 157.51 points (1.28%) to 12,500.57 points.

The day after a meeting at the White House, Democratic President Joe Biden and Republican House of Representatives “speaker” Kevin McCarthy reiterated their determination to find an agreement on the American debt ceiling and avoid the specter of default.

The US Treasury Department has warned that the federal government may be unable to make payments starting June 1, a scenario that would be catastrophic and raise the threat of a recession.

Relief also came from U.S. regional banks, up after Western Alliance Bancorp reported late Tuesday that deposits had risen by more than $2 billion in the past three months.

Western Alliance Bancorp jumped 10.19%, while the S&P-500 banking index recorded its highest daily percentage increase (4.46%) since November 10.

“There’s optimism about the debt ceiling, continued optimism that the banking crisis is behind us. Every day without new issues brings us closer to being able to put all of this behind us,” commented Rick Meckler, of Cherry Lane Investments, New Jersey.

“For sure the catalyst is having both Biden and McCarthy say they’re close (to a debt deal), it makes you assume that’s probably going to be the case,” he said. he says.

Tesla, up 4.41%, also contributed to the day’s performance after its boss Elon Musk calmed rumors of his possible retirement from the management of the automaker. He also reaffirmed, during the general meeting of shareholders on Tuesday evening, that the deliveries of the Cybertruck, long postponed, would begin this year.

Significant catalysts such as an agreement on the US debt ceiling or certainty on the Federal Reserve (Fed). Recent data points to a slowdown in the US economy following multiple rate hikes by the Fed to combat high inflation.

This economic slowdown, in addition to negotiations over the US debt ceiling, has heightened expectations on the Fed’s monetary policy, with investors wondering if and when the central bank will pause its rate hike campaign and reduce these.

While markets are currently pricing in a rate cut by the end of the year, Federal Reserve officials have recently hinted that they are not prepared to cut rates any time soon.

( Jean Terzian)

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