NEW YORK (AP) 鈥� Wall Street rose along with hopes that the U.S. government can avoid a default on its debt. The S&P 500 rose 1.2% Wednesday. The Dow added 408 points, also 1.2%. Much of the gain came after President Joe Biden said he鈥檚 confident of reaching a deal with Republicans. Washington faces a June 1 deadline when the U.S. government could run out of cash. Also boosting confidence was Target, which reported stronger profit than expected. That eased worries about the financial strength of U.S. households. Several beaten-down banks also rose to recover some of their big losses from earlier in the year.
THIS IS A BREAKING NEWS UPDATE. AP鈥檚 earlier story follows below.
NEW YORK (AP) 鈥� Wall Street is rising Wednesday with hopes the U.S. government can avoid a potentially disastrous default on its debt.
The S&P 500 was 1.2% higher in late trading, with much of the gain coming after President Joe he鈥檚 confident 鈥淎merica will not default.鈥� The Dow Jones Industrial Average was up 385 points, or 1.2%, at 33,397 with about 40 minutes left in trading, while the Nasdaq composite was 1.3% higher.
Biden鈥檚 comments came after House Speaker Kevin McCarthy said late Tuesday that Democrats and Republicans could reach a deal by the end of the week, though the two sides remain far apart. They鈥檙e staring down a June 1 deadline, which is when the U.S. government could run out of cash unless Congress allows it to borrow more.
A default could rock the financial system because Treasurys are assumed to be the safest possible investment on Earth, and economists say it would likely cause widespread damage across the economy.
Wednesday鈥檚 spurt comes after a long, listless stretch where the S&P 500 did not move by 1% over a week, up or down, for six straight weeks. That鈥檚 its longest such stretch since 2019.
Congress has raised the nation鈥檚 debt limit many times in the past, and most have occurred without much impact on the stock market, according to Chun Wang, senior research analyst at Leuthold. The fear is something similar to 2011 occurring.
That鈥檚 when Standard & Poor鈥檚 cut its credit rating for the U.S. government as it dithered in raising the debt limit. The downgrade coincided with a debt crisis flaring in Europe, and they together sent Wall Street on a neck-snapping roller coaster for a week.
Stocks of companies that get much of their revenue from the federal government, and thus may have much to lose if it can鈥檛 pay its bills, rose Wednesday. Lockheed Martin climbed 2.1%, and Northrop Grumman gained 2.6%.
The debt negotiations are just one of the issues hanging over Wall Street. Worries are also high about a hitting later this year because of much higher interest rates meant to get painful inflation under control.
One of the main positives that鈥檚 kept the economy out of a recession so far has been resilient spending by U.S. households. They鈥檝e continued to spend even as manufacturing, the U.S. banking system and other parts of the economy have cracked under the pressure of high rates.
offered some potentially encouraging data on the strength of shoppers when it said its profit fell by less last quarter than analysts feared. But it also said that it鈥檚 seeing softening sales trends early this year, and it did not raise its forecast for full-year earnings. Its stock rallied 2.5%.
A day earlier, raised worries when it cut its financial forecasts for the year after describing pressures across its business. Walmart is the next big retailer to report its results, and it鈥檚 coming up on Thursday.
Retailers are among the last of big U.S. companies to report their profits for the start of the year. Most companies in the S&P 500 have turned in earnings that were better than analysts feared. But they鈥檙e still on pace to finish with a second straight quarter of drops in profit from year-ago levels.
Besides the 鈥減rofit recession鈥� underway, pressure on the U.S. banking industry has also raised worries on Wall Street. Investors have been hunting for the next possible weak link following three high-profile failures since March.
Banks are struggling with high interest rates, which have caused some customers to pull their deposits in search of higher yields at money-market funds and other accounts. The leap higher in interest rates over the last year has also knocked down the values of many of the investments banks hold.
Much scrutiny has been on Western Alliance Bancorp and other smaller and mid-sized banks, which has led to wild swings in their stock prices. Western Alliance recovered some of its losses after it gave an update on its deposit levels through May 12, among other data. It jumped 11% Wednesday, though it鈥檚 still down about 40% for the year so far.
PacWest Bancorp, another bank under heavy scrutiny, rose 20.2% to trim its loss for the year to about 76.1%.
In the bond market, Treasury yields were ticking higher. The yield on the 10-year Treasury rose to 3.56% from 3.54% late Tuesday. It helps set rates for mortgages and other important loans.
The two-year yield, which moves more on expectations for action by the Federal Reserve, rose to 4.14% from 4.08%.
In markets abroad, Japan鈥檚 Nikkei 225 gained 0.8% after data showed the world's third-largest economy grew at its strongest pace since April-June 2022.
Stock indexes fell 2.1% in Hong Kong and were mixed amid modest movements in Europe.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
Stan Choe, The Associated Press
