US Stocks Rise Ahead Of Crucial Debt Ceiling Talks; S&P 500 Enters Bull Market, But Analyst Predicts False Bullish Breakout

U.S. equities inched higher on Monday as investors await the outcome of a crucial meeting over the debt ceiling raise between President Joe Biden and House Speaker Kevin McCarthy. The meeting will take place in Washington, D.C. at 5.30 p.m. ET, after market close. 

The stock market has been little affected by hawkish remarks from Fed speakers this morning, with Fed's Bullard calling for two more interest rate rises in 2023.  

U.S. Treasury yields have risen further. The yield on a one-month Treasury bill, which is a barometer of the debt ceiling risk, soared to over 5.6% Monday, the highest since data going back to 2002, up 17 basis points. 

JPMorgan Chase & Co JPM CEO Jamie Dimon will be speaking at the bank's investor conference, while Zoom Video Communication, Inc. ZM is expected to release its earnings after the market closes. 

Cues From Monday's Trading:

The S&P 500 index ticked 0.1% up to 4,200 points, marking a 21% rise since October lows and de-facto entering the so-called bull market. 

Blue-chip stocks in the Dow Jones Industrial Average index, eased 0.1%, while the Nasdaq 100 rose 0.5%, showing positive momentum for tech-related stocks. 

Small caps in the Russell 2000 index bounced 1.3%. 

Analyst Color:

Michael Wilson, U.S. equity strategist at Morgan Stanley, predicted the rally of the S&P 500 may have come to an end due to an unfavorable technical setup and expensive valuations. 

The analyst said the rally has not been broad-based among sectors, leading to a decline in "the average stock" of the S&P 500. 

"Passing the debt ceiling may ironically be the catalyst that ends this bear market rally, as it leads to a contraction in liquidity," Wilson said in a note on Monday.

Monday's Trading In Major US Equity ETFs: In midday trading on Monday, the SPDR S&P 500 ETF Trust SPY was 0.1% higher to $419.27, the SPDR Dow Jones Industrial Average ETF DIA fell 0.2% to $333.38 and the Invesco QQQ Trust QQQ was 0.3% higher to $337.63, according to Benzinga Pro data.

The most notable differences among S&P 500 sectors were highlighted by the underformance of the Consumer Staples Select Sector SPDR Fund XLP, down 1.5% on the day, while the Real Estate Select Sector SPDR Fund XLRE and the Communication Services Select Sector SPDR Fund XLC outperformed, each with a 1.1% gain. 

Latest Economic Data:

On Monday, no data was released, but a slew of Fed speakers made headlines.

• St. Louis Fed President James Bullard (FOMC member) said he expects two more interest rate hikes in 2023 to cool down inflation. 
• Richmond Fed President Thomas Barkin (FOMC member) said that he will "not prejudge the June meeting outcome," adding that he still needs to be "convinced that inflation is in a steady decline."
• Atlanta Fed President Raphael Bostic (FOMC member) said the Fed has tightened significantly, and policy operates with lag, adding that he is willing to wait now and watch how the economy plays out.
• San Francisco Fed President Mary Daly (FOMC member) said it's important for the Fed to keep options open in June. 

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Stocks In Focus:

Pfizer, Inc. PFE was up 3.4% on Monday after a clinical research reported that its oral drug Danuglipron caused as much weight reduction as Novo Nordisk's Ozempic injections and may perhaps work quicker.

• Micron Technology, Inc. MU stock fell 2.8% after China banned the company’s products on Sunday on the pretext of them being security risks.
• Nike, Inc. NKE fell 3% to $111, hitting its lowest levels in 2023 after Williams Trading downgraded the stock from Hold to Sell and lowered the price target from $120 to $95. 
• Meta Platforms, Inc. META rose 1.7% despite being fined a record $1.3 billion by European regulators for its handling of user information. The social media giant was also given the ultimatum that it should stop data transfer to the U.S. in five months.
• Nordson Corp. NDSN and Zoom Video Communications, Inc. ZM are among the companies reporting results after the market close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil ticked 0.3% up, with a barrel of WTI-grade crude rising to $72. The United States Oil Fund ETF USO was 0.1% up to $63.98 per share.  

Treasury yields rose, with the 10-year yield up by 4 basis points to 3.72% and the two-year yield up 6 basis points to 4.33%. The iShares 20+ Year Treasury Bond ETF TLT was 0.2% lower for the day. 

The dollar was flat, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, unchanged. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.1% higher to 1.0810.

European equity indices were mixed, with Italy, France and Germany falling, while Spain, Greece and the U.K. are rising. The iShares MSCI Eurozone ETF EZU was unchanged. 

Gold fell 0.2% to $1,973/oz. The SPDR Gold Trust GLD was 0.1% lower to $183.40. Silver also fell 0.7% up to $23.70, with the iShares Silver Trust SLV down 0.4% to $21.78 per share. Bitcoin BTC/USD rose 0.5% to $26,873.

Staff writer Piero Cingari updated this report midday Monday. 

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