Is Wall Street hopeful?

NEW YORK - Wall Street rallied mid-week in hopes the U.S. government will avoid a potentially disastrous default on its debt. 

The S&P 500 climbed 1.2%. The Dow Jones Industrial rose 408 points (1.2%), while the Nasdaq composite gained 1.3%. 

The administration and House GOP leaders could reach a deal by the end of the week but are staring at a June 1 deadline that the government could run out of cash - unless Congress acts. A default could rock the financial entire system.

Company stocks that get much of their revenue from the federal government, thus much to lose, rose on May 17. Lockheed Martin climbed 2.1%. Northrop Grumman gained 2.7%. 

Worries are also high about a possible recession hitting later this year because of much higher interest rates piled on by the Federal Reserve to gain control of inflation. 

One main positive that’s kept the economy out of a recession so far has been American spending, which has occurred even as manufacturing, banking and other parts of the economy have cracked under the pressure. 

Target offered some potentially encouraging data when it said its profit fell by less last quarter than analysts feared. But it also was seeing a softening of sales trends. Its stock rallied 2.6%.

Home Depot raised worries when it cut its financial forecasts for 2023. Walmart's financial report was due out May 18. 

Retailers are among the last of big U.S. companies to report profits for the start of the year. 

In the bond market, yields on the 10-year Treasury rose to 3.57% (from 3.54%). It helps set rates for mortgages and other major loans. The 2-year yield, which moves more on expectations, rose to 4.16% (from 4.08%). (The AP 05/17/23)