May 26 (Reuters) – U.S. stocks closed sharply higher on Friday as talks on raising the U.S. debt ceiling progressed, while chip stocks rose for the second day in a row on optimism about artificial intelligence.
A US official told Reuters that after several rounds of talks, US President Joe Biden and Republican Congressman Kevin McCarthy appeared to be close to reaching an agreement to increase the government’s $31.4 trillion debt limit for two years, while capping spending on most items.
The Dow Jones Industrial Average (.DJI) ended a five-day losing streak, while the Nasdaq Composite (.IXIC) and S&P 500 (.SPX) closed at their highest levels since August 2022, with the S&P 500 above 4,200 points.
The Philadelphia Semiconductor Index (.SOX) jumped 6.3%, bringing its gains in the past two sessions to more than 13%. Building on recent AI-related euphoria, Marvell Technology Inc (MRVL.O) jumped 32% after the chipmaker said it would double its annual AI-related revenue.
Investors have been closely watching the debt ceiling talks as Biden and McCarthy appear to remain at odds on several issues heading into the long weekend, with the US stock market closed Monday for the Memorial Day holiday.
“All signs point to the deal closing and the rally continuing, but if we get past the weekend and we don’t have a deal or it breaks down in some way, we’re going to wake up on Tuesday morning to some pretty physical losses,” said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina. “.
Nvidia Corp. (NVDA.O) stock rose 2.5%, adding to a 24% gain Thursday after expectations of a blowout, and raising the stock’s market value to about $960 billion, according to Refinitiv.
The S&P 500 rose by 1.30%, closing at 4,205.45 points.
The Nasdaq index rose 2.19% to 12,975.69 points, while the Dow Jones Industrial Average rose 1.00% to 33,093.34 points.
Of the 11 S&P 500 sector indices, eight, led by information technology (.SPLRCT), rose 2.68%, followed by a 2.38% increase in consumer appreciation (.SPLRCD).
Trading volume on US stock exchanges was relatively light, with 9.8 billion shares changed hands, compared to an average of 10.5 billion shares during the previous 20 sessions.
Over the course of the week, the S&P 500 rose 0.3%, the Dow fell 1.0% and the Nasdaq jumped 2.5%.
The data showed that US consumer spending rose more than expected in April and that inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.
“We still have inflation, we still have higher interest rates and that will continue to be a significant drag on the market until the Fed moves off the sidelines,” said David Sudkin, president of Bel Air Investment Advisors.
Traders now see a 60% chance the Fed will hike by 25 basis points at its June policy meeting, up from around 40% before the data, according to CME FedWatch.
Ford Motor Co (FN) jumped 6.2% after the automaker signed a deal allowing customers access to more than 12,000 Tesla Inc (TSLA.O) chargers in North America in early 2024. Tesla jumped 4.7%.
Ulta Beauty Inc (ULTA.O) fell 13.4% after the cosmetics retailer cut its annual operating margin forecast.
Paramount Global (PARA.O) stock rose 5.9% after the controlling shareholder of media conglomerate National Amusements received a $125 million investment.
Advance issues outnumbered falling issues in the S&P 500 (.AD.SPX) by a ratio of 2.2 to one.
S&P 500 records 17 new highs and 15 new lows; The Nasdaq index posted 77 new highs and 115 new lows.
Additional reporting by Shriyashi Sanyal and Shristi A. Ashar in Bengaluru and Noel Randewich in Oakland, CA; Editing by Magu Samuel, Vinay Dwivedi and Richard Chang
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