What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.30%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.14%, and the Nasdaq 100 Index ($IU) (QQQ) closed up +0.55%.

Stock indexes Monday closed moderately higher on hopes that a debt ceiling deal will be reached.  President Biden will reconvene with House Speaker McCarthy on Tuesday after staff-level talks were held over the weekend.  President Biden said the talks were “moving along,” and National Economic Director Brainard on Sunday said the negotiations were serious and constructive. However, House Speaker McCarthy said Monday said that the White House wants “a default more than a deal” and that “I still think we’re far apart.”  Treasury Secretary Yellen on Monday reiterated that the Treasury could default on its obligations as soon as June 1 without a debt ceiling hike.

Economic concerns were bearish for stocks after Monday’s May Empire manufacturing survey general business conditions index fell more than expected to a 4-month low. 

Mostly hawkish Fed comments on Monday pushed bond yields higher and weighed on stocks.  Minneapolis Fed President Kashkari said, "We have not seen much softening in the labor market, so that tells me we have a long way to go before we get inflation back down" to our 2% goal.  Also, Atlanta Fed President Bostic said high inflation suggests the Fed may need bias to hike rates further, and he doesn't expect to cut interest rates until well into 2024.  However, he said he's "expecting inflation to continue its steady decline," and he wants to wait and see and get a sense of how long or how quickly the economy is responding to Fed policy, so he's "inclined to pause rate hikes" at the June FOMC meeting.

The U.S. May Empire manufacturing survey general business conditions fell -42.6 to a 4-month low of -31.8, weaker than expectations of -3.9.

Global bond yields Monday moved higher.  The 10-year T-note yield rose +3.9 bp to 3.502%.  The 10-year German bund yield rose +3.3 bp to 2.309%, and the UK 10-year gilt yield rose +3.9 bp to 3.817%.

On the bullish side for stocks, Western Digital closed up more than +11% after Bloomberg Intelligence said the company’s merger talks with Kioxia are an “encouraging sign” and could unlock value for the company’s flash memory business.  Also, regional bank stocks rose Monday on dip buying as they recovered some of their recent sharp losses.  In addition, Sarepta Therapeutics closed up more than +30% after independent advisers to the U.S. FDA ruled that the company’s experimental gene therapy to treat Duchenne muscular dystrophy should be approved.

On the bearish side, ONEOK closed down more than -9% after several analysts said the $18.8 billion price the company paid to acquire Magellan Midstream Partners was too much.  Also, utility stocks moved lower after hawkish Fed comments pushed bond yields higher.  In addition, H&R Block closed down more than -2% after the Wall Street Journal reported that the IRS is considering creating a government-run alternative to the tax preparation company.

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed down -0.03%.  China’s Shanghai Composite closed up +1.17%, and Japan’s Nikkei Stock Index closed up +0.81%. 

Today’s stock movers…

Western Digital (WDC) closed up more than +11% to lead gainers in the S&P 500 after Bloomberg Intelligence said the company’s merger talks with Kioxia are an “encouraging sign” and could unlock value for the company’s flash memory business. 

Regional bank stocks rallied Monday on dip buying as they recovered some of their recent sharp losses. Zions Bancorp (ZION) closed up more than +8%, and Comerica (CMA) closed up more than +7%.  Also, KeyCorp (KEY) closed up more than +6%.  In addition, Citizens Financial Group (CFG), Synchrony Financial (SYF), M&T Bank (MTB), Fifth Third Bancorp (FITB), and Huntington Bancshares (HBAN) closed up more than +3%. 

Sarepta Therapeutics (SRPT) closed up more than +30% after independent advisers to the U.S. FDA ruled that the company’s experimental gene therapy to treat Duchenne muscular dystrophy should be approved.

Charles Schwab (SCHW) closed up more than +4% after Raymond James upgraded the stock to outperform from market perform with a price target of $63. 

Albemarle (ALB) closed up more than +4% after Baird upgraded the stock to outperform from neutral with a price target of $288.   

DuPont de Nemours (DD) closed up more than +2% after Deutsche Bank upgraded the stock to buy from hold with a price target of $80.

ONEOK (OKE) closed down more than -9% to lead losers in the S&P 500 after several analysts said the $18.8 billion price the company paid to acquire Magellan Midstream Partners was too much. 

Utility stocks were under pressure Monday after hawkish Fed comments pushed bond yields higher. Ameren (AEE) closed down more than -3%, and Exelon (EXC) and PG&E (PCG) closed down more than -2%.  Also, American Electric Power (AEP), WEC Energy Group (WEC), Entergy (ETR), NiSource (NI), Edison International (EIX), FirstEnergy (FE), and Xcel Energy (XEL) closed down more than -1%. 

H&R Block (HRB) closed down more than -2% after the Wall Street Journal reported that the IRS is considering creating a government-run alternative to the tax preparation company. 

Camden Property Trust (CPT) closed down more than -1% after Bank of America Global Research downgraded the stock to neutral from buy. 

Across the markets…

June 10-year T-notes (ZNM23) on Monday closed down -6.5 ticks, and the 10-year T-note yield rose by +3.9 bp to 3.502%.  June T-notes Monday closed moderately lower on hawkish Fed comments from Minneapolis Fed President Kashkari and Atlanta Fed President Bostic, who said the Fed may need to continue to raise interest rates with inflation still too high.  However, losses in T-notes were limited after the May Empire manufacturing index fell more than expected to a 4-month low.

• Why Investors Need to Have a Reality Check with the Options Volume for Bank of Hawaii (BOH)
• High Valuations a Concern for Tech Stocks
• Stocks Mixed as Hawkish Fed Comments Push Bond Yields Higher
• Tesla Stock Has Fallen, But Its Put Premiums Are Still High - Good For Short Income Plays