Stock market today: Dow closes higher on debt ceiling optimism, jump in banks

Investing.com -- The Dow closed higher Monday, as investors weighed up ongoing debt ceiling talks and a rebound in banking stocks following heavy losses last week.

The Dow Jones Industrial Average was 0.1%, or 47 points higher, the Nasdaq gained 0.7%, and the S&P 500 was up 0.3%.

Reports of progress on debt ceiling talks stoked optimism that U.S. lawmakers will be able to break the current deadlock and reach a deal to raise the Federal budget and prevent the United States defaulting on its debt.

"[E]fforts to resolve the situation over raising the debt ceiling appear to have been ramped up over the past few days,” Oppenheimer said in a note.

Further signs of progress will be closely watched as President Biden is set to meet with House Speaker Kevin McCarthy and other Congressional leaders on Tuesday.

Beyond the politics, regional banks remained in focus, rebounding from a selloff last week, with PacWest Bancorp (NASDAQ:PACW) up 17%, Comerica Inc (NYSE:CMA), up 7%, and Zions Bancorporation (NASDAQ:ZION) closing up more than 8%.

Still, despite the tech rally, concerns in the banking sector persist following data on Friday showing that U.S. commercial bank deposits fell for the second straight week, while lending activity also slipped following four weeks of gains.

“Corporate America goes to small and mid-term banks for loans, those loans are going to get harder to get. If companies can't get loans, or have a harder time getting loans, there’ll be less spending and the ripple effect goes on," Robert Conzo, CEO of The Wealth Alliance told Investing.com's Yasin Ebrahim in an interview on Friday.

Tighter lending standards will likely curb economic growth and help the Federal Reserve in its fight against inflation.

“This banking turmoil absolutely will do some of the Fed's work,” Conzo added. “This story is very much unfolding because there's a lot of banks out there."

Big tech stocks were mixed, though Meta Platforms Inc (NASDAQ:META) bucked the trend, rising more than 2% after Loop Capital upgraded the social media company to Buy from Hold, citing a "much brighter revenue picture.”

Microsoft (NASDAQ:MSFT), meanwhile, was marginally higher after regulators in the European Union approved the company’s proposed $69 billion deal to acquire video game publisher Activision Blizzard (NASDAQ:ATVI).

C3 Ai Inc (NYSE:AI) jumped more than 23% after the artificial intelligence software maker reported fourth-quarter results that topped Wall Street estimates.

In economic news, the Empire State manufacturing index for May plunged more than expected pointing to an ongoing slowing in manufacturing activity.

"The plunge in the May Empire State manufacturing index more than reverses the surprise spike in April, which stood out from the declines in all the other regional Fed manufacturing indexes," Pantheon Macroeconomics said in a note.