Wall Street Rallies on US Debt Ceiling Optimism, Indian Indices Decline

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Wall Street experienced a notable rally on Wednesday, driven by growing optimism about a potential deal to raise the US federal debt ceiling and a rebound in regional bank shares, which alleviated concerns about the sector’s troubles.

President Joe Biden and top Republican lawmaker Kevin McCarthy expressed their determination to strike a deal soon to raise the debt ceiling and avoid a disastrous default that could trigger a recession. The US Treasury has warned that without an agreement by June 1, it may run out of funds to pay the government’s bills.

The sentiment received a boost from the surge in regional bank shares, led by Western Alliance Bancorp, which reported significant deposit growth in the quarter.

The KBW regional bank index saw its largest one-day percentage gain of 7.29% since January 6, 2021, while the S&P 500 banks index recorded a 4.46% gain, its biggest since November 10. The Dow Jones Industrial Average rose by 1.24% to 33,420.77, the S&P 500 gained 1.19% to 4,158.77, and the Nasdaq Composite added 157.51 points to close at 12,500.57.

Tesla shares also contributed to the market’s positive performance, rising by 4.41% after the annual shareholder meeting. CEO Elon Musk dismissed rumours of stepping down, discussed new mass-market models under development, and reaffirmed the expected delivery of the long-delayed Cybertruck pick-up this year.

In contrast, India’s equity benchmarks experienced a second consecutive day of decline on Wednesday, reflecting the nervousness prevailing in global markets due to the ongoing uncertainty surrounding the US debt ceiling.

The Sensex closed at 61,560.64, was down 0.6% and the Nifty also declined by 0.57%. However, both indices managed to recover some of their losses towards the end of the day, aided by short covering. They have been trending downwards during the early market hours on Thursday too.

Foreign portfolio investors (FPIs) continued their net buying streak for the 15th session in a row, although the volume of their purchases was lower. According to provisional stock exchange data, FPIs bought shares worth Rs 149.33 crore in the cash segment, while domestic institutions were net sellers, offloading shares worth Rs 203.87 crore.

Among the sectoral indices, the NSE Midcap 150 index closed down 0.1%, while the Smallcap 250 index advanced by 0.4% and secured modest gains. The market breadth was weak, with only 794 stocks rising compared to 1,114 stocks ending in the red.

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