US Stocks Surge, Dollar Gains Strength Amid Debt Ceiling Progress

US stocks closed higher on Thursday, driven by growing optimism that a deal to raise or suspend the debt ceiling could be reached within days. Walmart (NYSE: WMT )'s upbeat annual sales forecast also provided support. The S&P 500 index rebounded from early declines after top US congressional Republican Kevin McCarthy stated that a deal might potentially be reached in time for a House vote next week. Walmart's shares gained following the retail giant's better-than-expected first-quarter earnings report and an improved 2023 sales and profit outlook.

Investors welcomed signs that two major market risks could be diminishing. Policymakers in Washington have hinted that a bill to raise the US debt ceiling may be introduced next week, potentially preventing a catastrophic default by the federal government. Strong economic data such as a better-than-expected Philly Fed index and a decline in weekly jobless claims have also allayed recession fears. However, the robust data has led to an increase in forward US rate expectations, propelling the dollar upwards.

Oil markets are conflicted between strong US economic data and deflationary impulses from China, with supply issues rather than demand affecting the bullish thesis.

On Thursday, US stocks and the dollar rose as Walmart raised its sales outlook and robust economic data alleviated recession concerns while also dampening hopes for a Federal Reserve interest rate cut before year-end. Investors kept an eye on debt ceiling negotiations in Washington for indications that Democrats and Republicans might be approaching a deal.

Among the three major US stock indexes, tech shares propelled the Nasdaq to its most significant gain, while healthcare restricted the blue-chip Dow's advance. The greenback extended its climb against a basket of world currencies, reaching a seven-week high, fueled by the economic data and debt ceiling hopes.