US stocks were subdued on Monday as investors awaited news on the debt ceiling negotiations and assessed fresh data that pointed to a slowdown in the economy.
The tech-heavy Nasdaq Composite Index rose 0.7 percent, extending gains from the previous week, while the Wall Street benchmark S&P 500 rose 0.3 percent.
The moves in US stocks came as traders waited for a breakthrough between the White House and Republican lawmakers on talks to raise the state borrowing limit and avoid a national default before President Joe Biden meets with leaders in Congress on Tuesday.
The KBW regional bank index, which has been suffering from the insolvencies of three lenders since March, rose by 3 percent.
“The stock market is stuck until we find a solution to the debt ceiling and until we see more clarity from the regional banking sector. Those are the two factors weighing on stocks right now,” Brad Bernstein, chief executive of UBS Wealth Management told US.
Fresh economic data on Monday reinforced signs that the Federal Reserve’s aggressive interest rate policy was starting to have an effect. The New York Fed said its index, which measures manufacturing activity in the state, fell to -31.8 from 10.8 in May, well below analysts’ forecast of -3.8. However, economists urged caution in interpreting the data, saying it may have been influenced by seasonal factors.
Moves in U.S. stocks continue a pattern of growth stocks outperforming value stocks year-to-date as the Nasdaq Composite gained 19 percent compared to an 8.1 percent rise for the S&P 500.
“Large incumbent technology companies have not disappointed during earnings season and have largely provided dovish guidance, something financial markets needed to hear,” said Quincy Krosby, chief global strategist at LPL Financial.
Traders also awaited Tuesday’s release of US Retail Sales for April, which will provide an overview of the health of American consumers amid cooling inflation and higher borrowing costs.
The dollar fell 0.3 percent against a basket of six other currencies, even as data last week showed US consumer expectations for long-term inflation hit a 12-year high.
In Europe, the regional Stoxx 600 rose 0.2 percent, while France’s CAC 40 and Germany’s Dax ended the day flat, having stabilized after trading lower for much of the session.
Eurostat, the EU statistics agency, reported that euro-zone industrial production fell by a more-than-expected 1.4 percent year-on-year in March after rising 2 percent in the previous month, suggesting that the European Central Bank’s tightening campaign the region’s economy cooled faster than expected.
“It’s still not enough for the ECB to believe its job is done,” said Mohit Kumar, Jefferies’ chief European economist. “They still need to raise more to fight inflation, but economic data suggests they’re not far off target.”
Meanwhile, Germany said its wholesale price index fell year-on-year for the first time since December 2020.
Asian stocks rose, with China’s CSI 300 gaining 1.6 percent and Hong Kong’s Hang Seng index gaining 1.8 percent. China’s renminbi fell to its weakest level in two months against the dollar on Monday.
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