Market Snapshot: Why the stock market will struggle to rally until debt ceiling, bank woes are in rearview mirror

by | May 14, 2023 | Stock Market

So much for the stock-market climbing the proverbial wall of worry. The S&P 500 index continues to struggle in a tight range and some analysts see little prospect for a breakout until two, very big worries are in the rearview mirror.

No surprise, the culprits are the persistent worries about regional U.S. banks following the collapse of Silicon Valley Bank and Signature Bank in March and the subsequent demise of First Republic Bank, along with the latest debt-ceiling showdown in Washington that threatens to tip the federal government into a first-ever default in early June.‘Capping’ rallies For now, those concerns can be described as “capping” rallies rather than “resulting in a downdraft,” Anastasia Amoroso, chief investment strategist at iCapital, told MarketWatch in a phone interview. But if more banks look in danger of failing or if the path to a debt-ceiling deal gets more rocky, investors should be prepared for a significant, but “buyable,” pullback, she said. Need to Know: Why the stock market has actually thrived as regional banks flounder Meanwhile, investors appear content to pile into tech stocks, particularly the biggest of the so-called megacap names, in something of a flight to safety that has sparked separate concerns over the durability of the stock market’s 2023 rally. The S&P 500
fell 0.3% last week, while the Dow Jones Industrial Average
dropped 1.1%. The S&P 500’s decline was cushioned by megacap tech-related stocks, which also helped lift the Nasdaq Composite
out of a bear market, gaining 0.4% last week. Stock-index futures were modestly lower Sunday evening. …

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