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Stock Market News for May 22, 2023

Wall Street closed lower on Friday, dampening the upbeat mood from the previous couple of sessions. Investors turned apprehensive about the apparent breakdown in talks between the political parties on the debt ceiling negotiations. Regional banking recovery took a hit on Treasury Secretary Janet Yellen’s comments. All three major indexes ended in the red.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.3% or 109.3 points to close at 33,426.63. Seventeen components of the 30-stock index ended in negative territory, while 13 ended in positive.

The S&P 500 lost 0.1% or 6.07 points to close at 4,191.98. Seven of the 11 broad sectors of the benchmark index ended in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC) and the Financials Select Sector SPDR (XLF) slid 0.8%, 0.5% and 0.4%, respectively, while the Energy Select Sector SPDR (XLE) gained 0.8%.

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The tech-heavy Nasdaq declined 30.94 points, or 0.2%, to finish at 12,657.90.

The fear-gauge CBOE Volatility Index (VIX) was up 4.7% at 16.81. A total of 9.9 billion shares were traded on Friday, lower than the last 20-session average of 10.6 billion. Decliners outnumbered advancers on the NYSE by a 1.36-to-1 ratio. On the Nasdaq, a 1.19-to-1 ratio favored declining issues.

No Progress in Debt Ceiling Talks

Ongoing negotiations between White House and Republican congressional negotiators on raising the Government's $31.4 trillion debt ceiling broke down on Friday on what currently seems to be irreconcilable ideological differences. With less than two weeks to go for Jun 1, the date on which the treasury warned the Government would be unable to pay all its debts, a perilous default might be in the cards.

Throughout the week, trade has remained hopeful that the two parties would eventually reach an agreement and the nation would be able to avoid this disgrace. However, with the two major parties not being able to reach a consensus on what spending to cut in order for the Government to borrow more, talks have broken down. Currently, President Biden’s return from the G7 meet is eagerly anticipated for any breakthrough to take place.

Treasury Secretary Says More Banking Mergers Maybe Around

According to sources, U.S. Treasury Secretary Janet Yellen told bank CEOs on Thursday that more bank mergers may be necessary as a result of a series of bank failures seen in the recent regional banking crisis. In recent sessions, regional banks have been doing well, keeping with the positive vibe in the market. The KBW Regional Banking Index (KRX) even managed to end the week 6.2% up, following three straight weeks of decline. But the treasury secretary’s comments took a toll on Friday as the index fell 2.2% in the session.

Consequently, shares of U.S. Bancorp USB and Capital One Financial Corporation COF lost 1.3% each. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Weekly Roundup

The three most widely followed indexes closed the past week in the green, ending a six-week stretch of mixed results. The Dow Jones Industrial Average advanced 0.4%, while the S&P 500 and the Nasdaq Composite gained 1.7% and 3%, respectively. For the S&P 500 and the Nasdaq Composite, this was the biggest weekly percentage advance since the end of March. Retail earnings, a probable rate pause announcement from the June FOMC meeting and hopes of a probable resolution to the debt ceiling question dominated trade all week.

No economic data was released on Friday.

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