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  • Writer's pictureKevin Hurley

Marketbites: Nasdaq Gains Carried by AI Enthusiasm

Updated: Jun 22


Portfolio Manager Commentary:

The major indices fell Wednesday as investors kept an eye on the federal debt ceiling debate in Washington in the final trading day of May. The deal, which was reached over the weekend by President Joe Biden and House Speaker Kevin McCarthy, cleared a major test Tuesday night after advancing to the House floor following a 7-6 vote in the House Rules Committee. The floor vote is expected to take place Wednesday evening. “I think we have the votes to pass this today,” said Rep. Patrick McHenry, a GOP negotiator on the debt deal, on CNBC’s “Squawk Box” Wednesday morning.

Wednesday’s close marked the end of the May trading month. The Nasdaq Composite finished the month 5.8% higher, helped by a rally in artificial intelligence-related stocks and other technology names. The S&P 500 added nearly 0.3% in the month, despite at one point relinquishing its month-to-date gains during Wednesday’s selloff. The Dow fell almost 3.5% in the month, pulled down by May losses greater than 10% from Nike, Walt Disney, Walgreens, 3M, Chevron, and Dow, Inc.

Chart of the Day:

Recessions over the past 30 years have closely tracked the willingness of banks to lend out the cash they collect from depositors. Bankers are charging higher interest rates on loans to consumers and corporations and for commercial real estate, according to the Fed’s senior loan officer opinion survey. They are also demanding that borrowers post more collateral. Investors willing to take the risk are finding ways to benefit.

Joel Holsinger, co-head of alternative credit at $360 billion fund manager Ares Management, specializes in lending to companies that fall in a credit gap because they can’t easily borrow from banks or bond investors. The gap widened into a canyon in recent months, he said. “Recessions and default cycles are healthy—they’re the antibiotic that begins the healing,” Mr. Holsinger said. “It also creates an opportunity for credit investors.”

Source: WSJ

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