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Stock Market News for Jun 2, 2023

U.S. stocks ended sharply higher on Thursday, with the S&P 500 and Nasdaq closing at their nine-month highs, as the House passed the crucial debt ceiling bill in a major step to avoid a default. Also, a batch of economic data released on Thursday raised hopes that the Fed may finally put a pause on hiking interest rates. All three major indexes ended in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.5% or 153.30 points to end at 33,061.57 points.

The S&P 500 climbed 1% or 41.19 points to finish at 4,221.02 points, recording its highest close since Aug 19, 2022. Materials, energy, communication services and consumer discretionary stocks were the biggest gainers.

The Materials Select Sector SPDR (XLB) and the Energy Select Sector SPDR (XLE) advanced 1.3% and 1.2%, respectively. The Communication Services Select Sector SPDR (XLC) rose 1.4%, while the Consumer Discretionary Select Sector SPDR (XLY) gained 1.2%. Nine of the 11 sectors of the benchmark index ended in positive territory.

The tech-heavy Nasdaq jumped 1.3% or 165.70 points to finish at 13,100.98 points, registering its highest close since Aug 16, 2022.

The fear-gauge CBOE Volatility Index (VIX) was down 12.76% to 15.65. Advancers outnumbered decliners on the NYSE by a 3.04-to-1 ratio. On Nasdaq, a 1.99-to-1 ratio favored advancing issues. A total of 11.14 billion shares were traded on Thursday, higher than the last 20-session average of 10.58 billion.

Investors Cheer Vote on Suspending Debt Ceiling

Wall Street witnessed one of its best openings for a month in a long time as stocks rallied after a series of economic data raised hopes that the Fed could finally pause its rate hikes. Investors also were upbeat after the House of Representatives passed the Fiscal Responsibility Act by a vote of 314-117 with bipartisan support on Wednesday night.

This will now put the U.S. government on track to avoid a default by allowing the federal government to raise the legal borrowing capacity before June 5.

It had earlier been feared that the bill would face a snag given that senators from both parties had earlier pushed for amendments which would have forced the bill to be sent back to the House for another vote.

The crucial vote was cheered by investors, which saw a renewed rally in big tech stocks, helping the S&P 500 and Nasdaq record their best close since Aug 19 and Aug 16, respectively. Shares of Apple Inc. (AAPL) gained 1.6%, while Meta Platforms, Inc. (META) jumped 3%. Apple has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here.

Investors’ focus will now shift to the Fed’s next policy meeting. A batch of economic data on construction and manufacturing released on Thursday hinted at slowing industrial and factory activity have been slowing in the United States.

This has once again made investors optimistic that the Fed could finally pause hiking its interest rates, which could begin as early as June.

Economic Data

In a batch of economic data released on Thursday, the ISM manufacturing purchasing managers index (PMI) declined to 46.9 in May, down from 47.1 in the prior month. This is the seventh straight month of decline for the manufacturing sector.

Separately, the S&P Global manufacturing PMI came up with a reading of 48.4 in May, declining from 50.2 in April.

However, the Commerce Department said on Thursday that Construction Spending improved in April for the second straight month. Construction spending grew 1.2% in April after increasing 0.3% in March and beating analysts’ expectations of a rise of 0.2%. Year-over-year, construction spending jumped a solid 7.2% in April.

Meanwhile, ADP private payrolls data showed that the U.S. economy unexpectedly added 278,000 jobs in May, surpassing expectations of a rise of 100,000.

Separately, the Labor Department reported that jobless claims totaled 232,000 for the week ending May 27, increasing 2,000 from the previous week’s revised level of 230,000. The four-week moving average was 229,500, a decrease of 2,500 from the previous week’s revised average of 232,000.

Continuing claims came in at 1,795,000, an increase of 6,000 from the previous week’s revised level of 1,789,000. The 4-week moving average was 1,797,500 a decrease of 1,500 from the previous week's revised average of 1,799,000.

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