Optimism Returned to Debt ceiling Talks, Housing Activities Fall

Barry Adams
17 May, 2023
New York City

Stocks traded higher after both sides signaled easier path to an agreement and vowed to avoid catastrophic debt default. 

Benchmark indexes inched higher after President Joe Biden and House Speaker Kevin McCarthy offered optimism after a meeting on Tuesday. 

The White House said President Biden canceled the second leg of an international trip after completing the meeting with G7 leaders in Japan. 

President Biden was scheduled to visit Papua New Guinea and Australia and meet leaders of Australia, Japan and India.  

President Biden and congressional leaders are hoping to have an agreement by this weekend and lift the current debt ceiling of $31.4 trillion. 

Investors are hoping that a clarity on debt ceiling may calm market sentiment and keep focus on economic growth and rate path. 

The latest data on the housing market showed higher prices and rising interest rates are denting housing starts and building permits. 

 

Higher Rates and Prices Weigh On Housing Market 

Housing starts advanced 2.2%, building permits declined 1.5% and completions dropped 10.4% in April, the U.S. Census Bureau reported Wednesday. 

Seasonally adjusted building permits increased to an annual rate of 1.416 million,  housing starts to 1.401 million and completions to 1.375 million. 

Building permits declined 21.1%, starts fell 22.3% and completions rose 1% from a year ago. 

Higher home price and elevated mortgage rates continue to weigh on the housing market. 

Single-family housing permits increased 3.1% to 855,000 units, housing starts rose 1.6% to 846,000 and housing completions fell 6.5% to 971,000. 

 

Mortgage Applications Declined 5.7% 

Applications for new mortgages declined 5.7% in the week ending on May 12, reversing an increase of 6.3% in the previous week, reported Mortgage Bankers Association Wednesday. 

Seasonally adjusted composite index declined from the previous week and unadjusted index decreased 6.0%.

The Refinance Index decreased 8% from the previous week and was 43% lower than the same week one year ago. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less increased to 6.57% from 6.48%, with points including origination fee held at 0.61% for 80% loan-to-value ratio loans.

 

U.S. Indexes & Yields 

The S&P 500 index increased 0.25% to 4,125.06 and the Nasdaq Composite rose 0.07% to 12,355.94.

The yield on 2-year Treasury notes increased to 4.11%, 10-year Treasury notes edged up to 3.54% and 30-year Treasury bonds held at 3.86%. 

Crude oil rose $0.80 to $71.65 a barrel and natural gas prices fell 3 cents to $2.33 a thermal unit. 

 

U.S. Stock Movers 

Target Corp increased 1.7% to $159.62 after the retailer reported only 0.6% increase in revenue to $25.32 billion. Store traffic increased 0.9% on top of 3.9% in the quarter a year ago. 

Net income declined 5.8% to $950 million from $1.0 billion and diluted earnings per share fell to $2.05 from $2.16 a year ago. 

EVgo Inc dropped 13.4% to $4.96 after the electric vehicle charging stations network operator reported a $125 million secondary offering. 

Keysights Technologies Inc jumped 7.7% to $157.74 after the company reported higher-than-expected fiscal second quarter adjusted earnings and offered a positive outlook for the current quarter.