US Stocks Soar On Debt Ceiling Deal Hopes Despite Fed Hike Risks; Nvidia Eyes $1-Trillion Market Cap On Monster AI Rally

Stocks are climbing across the board on Friday, fueled by increased investor optimism about a debt limit agreement. 

All major averages traded comfortably in the green, with sharp gains in the rate-sensitive tech and consumer discretionary sectors, despite the release of an unexpectedly high PCE inflation report that is further bolstering expectations for another Fed interest rate hike ahead. 

Cleveland Fed President Loretta J. Mester said Friday that she would favor a hike in June and then holding rates for a while. 

The policy-sensitive two-year Treasury yield has risen to 4.6%, the highest level since March 11. 

NVIDIA Corp. NVDA gained 2.5% as of noon Friday, bringing its weekly gains to almost 25% and its entire capitalization to $960 billion, just shy of $1 trillion.

Cues From Friday’s Trading:

The S&P 500 rose 1.3%, while the tech-heavy Nasdaq 100 index increased 2.5%, on track for its third straight session of gains. Small caps in the Russell 2000 index rose 1.2%, while blue-chip stocks in the Dow Jones Industrial rose 1%.  

Analyst Color:

Signals from either side of the aisle point to a potential resolution for the debt ceiling impasse, said Quincy Crosby, chief global strategist at LPL Financial.

Crosby said he sees House Speaker Kevin McCarthy (R-CA)'s comment that "not everybody is going to be happy at the end of the day” as a positive.

“Political ‘horse trading,’ the basis for successful negotiating, demands that both sides are left with complaints, not one side or the other,” the analyst said.

“This, coupled with reports that the sides are working late into the night and returning each other's calls has only added to the cautious optimism that a deal is the offing.”

The analyst sees positive sentiment out of Nvidia’s earnings, Best Buy, Inc.'s BBY upbeat results and headlines pointing to a debt ceiling resolution to “finally help lift a broader underpinning of the market.”

Friday's Trading In Major US Equity ETFs: In midday trading on Friday, the SPDR S&P 500 ETF Trust SPY was 1.2% higher to $419.72, the SPDR Dow Jones Industrial Average ETF DIA rose 0.9% to $330.70 and the Invesco QQQ Trust QQQ was 2.5% higher to $348.10, according to Benzinga Pro data.

Almost all U.S. equity sectors were positive, except for the Energy Select Sector SPDR Fund XLE, the Health Care Select Sector SPDR Fund XLV and the Utilities Select Sector SPDR Fund XLU.

Sharp gains were posted by the Consumer Discretionary Select Sector SPDR Fund XLY, up 2.8%, and the Technology Select Sector SPDR Fund XLK, up 2.7%. 

Latest Economic Data:

The Bureau of Economic Analysis revealed the PCE price index inflation was 4.4% in April, up from 4.2% in March and above the 4.3% expected. 

Core PCE also came in higher than predicted and above the previous reading (4.7% vs 4.6%). 

Personal income rose 0.4% on the month, as expected, while consumer spending printed a 0.8% monthly increase, well above the expected 0.5%. 

The Commerce Department reported a 1.1% monthly increase in durable goods orders for April, down from the 3.2% increase in March but above the expected 1.1% decline.

The University of Michigan’s final consumer sentiment index for May was revised higher from 57.7 to 59.2. 

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Stocks In Focus:

• Marvell Technology, Inc. MRVL jumped over 27% following the release of its earnings report.
• PDD Holdings Inc. PDD rocketed 18% as a result of better-than-expected earnings. 
• Broadcom Inc. AVGO surged 9% to a record close as investors welcomed a deal with Apple Inc. AAPL.
  Ulta Beauty, Inc. ULTA fell over 12% after disappointing data last quarter. 
• Paramount Global PARA rose nearly 6% after The Wall Street Journal said the company’s controlling shareholder, Shari Redstone’s National Amusements, secured a $125-million investment from merchant bank BDT & MSD Partners,

Commodities, Bonds, Other Global Equity Markets:

Crude oil rose 1%, with a barrel of WTI-grade crude rising to $72.5. The United States Oil Fund ETF USO was 0.8% higher to $64.60 per share.  

Treasury yields were mixed, with the 10-year yield up flat at 3.81% and the two-year yield up 4 basis points to 4.58%. The iShares 20+ Year Treasury Bond ETF TLT was 0.3% higher for the day. 

The dollar was broadly unchanged, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, flat. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was at 1.0721.

European equity indices were all in the green. The SPDR DJ Euro STOXX 50 Etf  FEZ rose 1.4%. 

Gold ticked 0.2% higher to $1,943/oz. The SPDR Gold Trust GLD was 0.2% higher to $180.55. Silver climbed 2.2% to $23.21, with the iShares Silver Trust SLV up 2.2% to $21.32 per unit. Bitcoin BTC/USD rose 1.3% to $26,215.

Staff writer Piero Cingari updated this report midday Friday. 

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