Stock Market Today: Debt Ceiling News Drives Major Stock Rally

It was a slow start to the trading session Thursday as Wall Street mulled over another round of retail earnings. However, reports that debt ceiling negotiations are progressing lit a fire under stocks, with all major indexes rallying hard into the close. 

Target (TGT, +2.6%) was the latest major retailer to disclose its first-quarter results. The company said earnings were down 6.2% year-over-year to $2.05 per share, while revenue edged up 0.6% to $25.3 billion. The company also forecast lower-than-expected Q2 earnings and said it expects same-store sales to be down in the low-single digit percentage range vs analysts' estimates for a slight increase.

However, the relatively strong Q1 results kept full-year guidance intact, says David Wagner, portfolio manager at Aptus Capital Advisors, an Alabama-based registered investment advisor with $4.25 billion in assets under management.

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"Consumables items continue to outperform lagging discretionary category sales," Wagner notes. "Lapping last year's freight, markdown and inventory issues ahead creates easy comparisons near term, but we acknowledge that an underwhelming Q2 guide is likely to make the year more weighted toward the second half." 

Off-price department store operator TJX (TJX, +0.9%) was another retailer that unveiled its first-quarter results today. The company said earnings jumped 55% year-over-year to 76 cents per share, while revenue was up 3.3% to $11.8 billion. Same-store sales rose 3%. 

"Some of the commentary [from Target and TJX] was similar to what we heard yesterday [from Home Depot (HD)] as there was some weakness in housing related big-ticket discretionary purchases due in part to some normalization in that category," says Michael Reinking, senior market strategist at the New York Stock Exchange. "Demand in staples categories was stronger. While the results are not perfect they also don't suggest that consumer spending is falling off a cliff. The focus shifts to Walmart (WMT) tomorrow."

Debt ceiling progress

While retail earnings were certainly a main discussion point early on in the session, focus quickly shifted to the debt ceiling. Following a Tuesday meeting with President Joe Biden, House Speaker Kevin McCarthy told reporters that he believes a deal is "possible" by the end of this week. Biden shared in the optimism, saying that "there's no alternative" but to do "the right thing for the country."

Those developments were well-received by the market. At the close, the Dow Jones Industrial Average was up 1.2% at 33,420, the S&P 500 was 1.2% higher at 4,158, and the Nasdaq Composite had gained 1.3% to 12,500.

Hedge funds' favorite blue chip stocks

"What's the smart money doing?" It's a question we try to answer each quarter following the required disclosure of asset managers' stock holdings. We do this not to duplicate the actions taken by hedge funds, other institutional investors and billionaires, but rather as a learning exercise – to observe what those with access to research and information typically not available to the average investor are doing with their capital. 

Looking at the stocks Warren Buffett is buying and selling shows that the famed investor dropped more equities from the Berkshire Hathaway equity portfolio than he added during the first three months of 2023. 

As for hedge funds, they remained heavily invested in blue chip stocks in the first quarter. However, they were also net sellers of Apple (AAPL) and Microsoft (MSFT) during a period in which they arguably should have been buying those Dow stocks instead of unloading them.