Wall Street ends mixed as debt ceiling discussion continues

Wall Street ended mixed on Monday as investors anticipated the outcome of the U.S. debt ceiling talks among the country's top politicians.

The S&P 500 concluded the trading session at 4,192.63, adding 0.65 points or 0.02 percent. The Nasdaq Composite finished at 12,720.78, gaining 62.88 points or 0.50 percent. On the other hand, the Dow Jones Industrial Average lost 140.05 points or 0.42 percent to close at 33,286.58.

OANDA senior market analyst Edward Moya said mega-cap tech stocks like Alphabet and Meta had become "new favorite defensive trade" on Wall Street as the debt ceiling "drama" progressed. Technology-related stocks boosted the market during the trading session, with Google parent Alphabet gaining 1.87 percent and Meta Platforms adding 1.10 percent.

Pfizer stock gained more than five percent after a new scientific report showed that the pharmaceutical company's diabetes drug, currently in a trial stage on type 2 diabetes patients, resulted in weight loss like Novo Nordisk's Ozempic.

Greenhill & Co soared 116.22 percent after Mizuho Financial Group announced that it would acquire the New York-based investment bank for $550 million, including debt.

The KBW Regional Banking Index added more than three percent after PacWest Bancorp said it had agreed to sell a portfolio of 74 real estate construction loans, amounting to $2.6 billion, to property firm Kennedy-Wilson Holdings. PacWest traded 19.55 percent higher for the day, while Western Alliance Bancorp gained 10.31 percent.

Shares of larger banks were more subdued in the session, with JPMorgan Chase posting a 0.83 percent loss to $138.03 even though the New York-based bank forecast that its net interest income would increase by $3 billion because it acquired First Republic Bank earlier this year.

Chevron stock became the biggest weight in the Dow Jones index, falling by 1.8 percent after the energy company announced a plan to acquire Denver-based oil and gas firm PDC Energy for $7.6 billion in an all-stock transaction.

Apple shares went down by 0.55 percent to $174.20 after investment manager Loop Capital downgraded its stock rating from "buy" to "hold," the iPhone producer's first rating cut in five months.

Micron Technology shares also saw a 2.85 percent decline after China prohibited the chipmaker from selling memory chips to key industries in the country. Analysts said the Chinese government's move indicated heightened trade tensions between the U.S. and China.

Analysts said investors refrained from making "big bets" as they waited for the conclusion of debt ceiling talks. U.S. President Joe Biden and House Speaker Rep. Kevin McCarthy continued their discussion about raising the federal debt limit on Monday, just ten days before the country could face a "catastrophic" default.

Recent reports revealed that Monday's meeting ended with no deal because Democrats and Republicans could not agree on each side's terms. Democrats have proposed new tax mechanisms that the opposition refuses, while Republicans demand "extreme" spending cuts that can negatively affect federal programs.

The market predicted a 60 percent chance that lawmakers would make a deal in time, according to CFRA Research chief investment strategist Sam Stovall.

"Investors are basically saying, 'We're giving at least a 60:40 likelihood that they will come to an agreement in time.' An agreement could simply be the extension, kicking it down the road to decide on a debt ceiling when they also discuss the budgets in September."

Sam Stovall, CFRA Research chief investment strategist

Fed's monetary tightening campaign may still continue

The Federal Reserve's upcoming rate policy decisions also influence the trend in the stock market, said analysts. The central bank previously raised the benchmark rate by a quarter of a percentage point to bring the fed funds rate in the range of 5.00 to 5.25 percent.

Although the central bank's latest meeting results indicated a hike pause soon, St. Louis Fed President James Bullard said Monday that the central bank might still need to raise the interest rate by 50 basis points this year. JPMorgan CEO Jamie Dimon also said investors should prepare for the fed funds rate to hit six percent or even higher.