US stocks move higher, dollar gains as debt limit talks inch forward

Wall Street was modestly higher on Wednesday and the dollar advanced as regional banks surged and negotiations in Washington over raising the debt ceiling inched forward.

All three major U.S. stock indexes were higher with investors looking past a dismal second-quarter outlook from Target Corp, coming on the heels of a similarly downbeat forecast from Home Depot Inc on Tuesday as first quarter earnings season winds down.

"Retail reports, from Target today and Home Depot yesterday suggest consumers are slowing their spending down, and that’s rippling through markets," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Regional banks provided some lift, with the KBW Regional Banks index up nearly 3.5% amid waning concerns of a liquidity crisis in the sector.

Debt ceiling negotiations preoccupied market participants, who took heart from Republican House of Representatives Speaker Kevin McCarthy's vow to avoid what would be a catastrophic default.

"The two sides are talking, and they don’t seem as dug in as they were a week ago," Tuz added. "I'm optimistic that this will get resolved in the tenth hour rather than the eleventh.

"They always take it to the brink and put a patch on it."

The Dow Jones Industrial Average rose 110.29 points, or 0.33%, to 33,122.43, the S&P 500 gained 13.94 points, or 0.34%, to 4,123.84 and the Nasdaq Composite added 39.54 points, or 0.32%, to 12,382.59.

European shares turned negative as sentiment was weighed down by downbeat earnings and mounting concerns over the possibility of a U.S. debt default.

The pan-European STOXX 600 index lost 0.19% and MSCI's gauge of stocks across the globe gained 0.04%.

Emerging market stocks lost 0.35%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.57% lower, while Japan's Nikkei rose 0.84%.

The dollar gained ground against a basket of world currencies, the greenback benefiting from its safe-haven status as debt ceiling talks grind on.

The dollar index rose 0.4%, with the euro down 0.31% to $1.0827.

The Japanese yen weakened 0.65% versus the greenback at 137.30 per dollar, while Sterling was last trading at $1.2469, down 0.13% on the day.

U.S. 10-year Treasury yields reversed direction, inching higher after housing data showed an increase in groundbreaking and building permits for single-family homes.

Benchmark 10-year notes last rose 3/32 in price to yield 3.5396%, from 3.549% late on Tuesday. The 30-year bond last rose 13/32 in price to yield 3.8492%, from 3.873% late on Tuesday.

Oil prices rebounded as investor concerns over lackluster demand was trumped by tight supply. U.S. crude rose 0.72% to $71.37 per barrel and Brent was last at $75.48, up 0.76% on the day.

Gold pulled back in opposition to the rising dollar after remarks from Federal Reserve officials suggested any talk of rate cuts would be premature. Spot gold dropped 0.2% to $1,983.89 an ounce.