Stock Market Today: Stocks Rally on Debt Ceiling News, Manufacturing Data

Stocks started the day in negative territory in response to a red-hot reading on the labor market. 

The major indexes rallied into the close, however, helped by a batch of bad-news-is-good-news manufacturing data and signs the debt ceiling deal could make it across the finish line ahead of the June 5 default date. 

Ahead of the opening bell, data from ADP showed the U.S. added 278,000 private jobs in May vs economists' estimates for a gain of 180,000. Today's report comes ahead of tomorrow's nonfarm payrolls data that is expected to show an increase of 188,000 new jobs last month.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Manufacturing data comes in soft

Also on the economic front, data from both S&P Global and the Institute for Supply Management (ISM) showed manufacturing activity weakened in May. 

"If the Federal Reserve is looking for an excuse to not hike key interest rates in June, the ISM manufacturing report should be cited as the reason, since only four of the 18 industries ISM surveyed reported an expansion," says Louis Navellier, chairman and founder of Navellier & Associates. May marked the seventh straight month the ISM manufacturing index came in below 50, a level which signals contraction. 

At last check, Fed funds futures were pricing in a 76% probability of a pause at the next Fed meeting, scheduled for later this month.

Also boosting investor sentiment were hopeful debt ceiling headlines. The House of Representatives last night passed the Fiscal Responsibility Act that will suspend the debt ceiling through January 2025. The bill now heads to the Senate with some saying a vote could come as early as today.

Revenue guidance weighs on C3.ai stock

In single-stock news, C3.ai (AI) plunged 13.2% after the artificial intelligence software startup reported earnings. While AI reported a narrower-than-expected fiscal fourth-quarter loss on higher-than-anticipated revenue, it gave a soft revenue guidance for its current fiscal year. Still, Wedbush analyst Daniel Ives upgraded C3.ai to Outperform from Neutral – the equivalents of Buy and Hold, respectively – saying the company "has turned a corner and is ready to now capitalize on the $800 billion AI transformational opportunity over the next decade."

Today's decline for C3.ai shares didn't seem to faze other AI stocks, with artificial intelligence players like Nvidia (NVDA, +5.1%) and Snowflake (SNOW, +1.2%) ending higher on the day.

As for the major indexes, the Nasdaq Composite climbed 1.3% to 13,100, the S&P 500 rose 1.0% to 4,221, and the Dow Jones Industrial Average rose 0.5% to 33,061. 

Why invest in index funds?

There are many reasons investors choose to invest in index funds. For one, they're a cheap way to gain access to the market. What's more, they allow investors to diversify their portfolios. Index funds "can include hundreds or even thousands of stocks or bonds across a range of sectors and sizes," writes Kiplinger contributor Coryanne Hicks in her article on why you should invest in index funds, adding that "diversification reduces the risk of any one stock derailing your portfolio's performance." 

But perhaps one of the best arguments for investing in index funds comes from Dan Burrows, senior investing writer at Kiplinger.com. "It's almost impossible to beat the market for any sort of sustained period of time," Burrows writes in his feature on why he chooses index funds over stocks. "You might get lucky for a year or two; maybe three even. But you are probably not the next Warren Buffett. I know for certain that I'm not." We recently updated our list of the best index funds to buy, which offers a wide selection of options for investors to choose from.

Related Content

• Kiplinger's Weekly Earnings Calendar
• When is the Next CPI Report?
• When Is the Next Fed Meeting?