Progress on U.S. debt ceiling talks and a sign of health at one regional bank gave markets the confidence to rally Wednesday.
U.S. leaders from both sides of the political spectrum expressed hope that the country will avert a sovereign debt crisis, which could come in as little as two weeks, if U.S. Treasury Secretary Janet Yellen's warning of a June 1 deadline comes true. Though neither Biden nor McCarthy offered concrete details on a deal, their comments were markedly more positive than those on Monday, when McCarthy told NBC News both sides are still "far apart."
Adding to yesterday's positive sentiment, regional bank Western Alliance reported that customer deposits have grown by more than $2 billion throughout the current quarter. Analysts and investors cheered the news. Shares of the bank jumped 10.2% and helped to lift the sector. PacWest, another regional bank, surged 21.7%, while the broader SPDR S&P Regional Banking ETF (KRE) rose 7.4%.
Technology stocks rallied yesterday, possibly because of diminishing fears of a debt crisis and positive sentiment from Tesla, which climbed 4.4% after the company's shareholder meeting. The Technology Select Sector SPDR Fund (XLK) rose 1.2%, hitting a 52-week high for the third straight day.
Major stock indexes benefited from those rises. The Dow Jones Industrial Average closed 1.24% higher, the Nasdaq Composite added 1.28% and the S&P 500 rose 1.19%.
But the S&P might be too reliant on tech stocks, Mizuho warned. Simply put, without Big Tech stocks, the S&P 500 would be down for the year. That implies that if Big Tech experiences a downturn — as it did last year — then the S&P would tumble pretty quickly.
As Mizuho's note put it, "For our sake, hope [Big Tech companies] hold."
