4.05pm: Wall Street ends on mixed footing
Coming off Memorial Day weekend, traders were buoyed by the deal reached on the debt ceiling but still concerned about inflation and interest rates ahead of the jobs report on Friday.
At the close, the Dow had lost 0.2% to finish at 33,073 points, the S&P 500 was flat at 4,206 and the Nasdaq was buoyed by NVIDIA to finish 0.3% ahead at 13,017 points.
Craig Erlam, Senior Market Analyst, UK & EMEA at OANDA called the newly-reached debt ceiling agreement "a massive step forward on the path to avoiding default."
"The debt ceiling distraction is almost behind us, with the House and Senate expected to vote this week on the deal that was reached between President Joe Biden and House Speaker Kevin McCarthy over the weekend," Erlam wrote.
"That will put an end to fears of a US default, or at least talk of it as the outcome itself was almost certainly never going to happen. We can now get back to focusing on the actual risks facing markets and the economy this year, being inflation and interest rates, and whether optimism over the end of the tightening cycle was premature.
"The jobs data on Friday is the next big test and considering how little progress has been made elsewhere to this point, you have to wonder whether the central bank has it in them to not hike again if we see another strong report. I'm sure many would like to but the fact is the economy is still displaying remarkable resilience and until that changes, not tightening may be viewed as more of a gamble."
12.05pm: Stocks pare gains ahead of debt ceiling vote
US stocks were mixed in noon trading as investors anxiously await Congress to pass a tentative deal on raising the US debt ceiling.
At midday, the Dow lost 118 points to 32,975, while the S&P 500 added 6 points at 4,212 and the tech-heavy Nasdaq gained 81 points to 13,057.
“Markets climb walls of worry at the end of the day, and the debt ceiling is obviously some type of worry,” Fort Pitt Capital Group investment analyst Chris Barto said in a statement.
Other notable movers included shares of Tesla Inc (NASDAQ:TSLA), which moved up 4% after its CEO Elon Musk made his first visit to China in about three years, meeting with the country’s Foreign Minister Qin Gang.
9:41: Nvidia joins the $1 trillion club
Shortly after the opening bell, the Dow was up 18 points to 33,112, the Nasdaq Composite added 142 points, 1.2%, to 13,120 and the S&P 500 improved 26 points, 0.6%, to 4,231.
Investors seem cautiously optimistic that a deal will get done to raise the debt ceiling and avoid a US default.
"It looks increasingly likely that Congress will pass a debt deal to prevent a default," said Fawad Razaqzada, market analyst at City Index and FOREX.com. "Investors’ required rate of return has thus fallen by holding US government debt, as the risk of default has fallen in their eyes. This is reflected in falling bond yields. As yields dip, up goes the appeal of zero-yielding assets on a relative basis."
Meanwhile, the Nasdaq has been helped by Nvidia, shares of which are up 4.8% to $408.65 — giving the tech giant a $1 trillion market cap. Shares will need to close above $404.86 Tuesday to clinch that honor.
7:55am: Deal or no deal?
Wall Street is likely to open in the green as traders return from the Memorial Day long weekend to news that US President Joe Biden and House Speaker Kevin McCarthy reached a final agreement on Sunday to raise the country’s debt ceiling, now at $31 trillion.
Futures for the Dow Jones Industrial Average rose less than 0.1% in Tuesday pre-market trading, while those for the broader S&P 500 index gained 0.6% and contracts for the Nasdaq-100 jumped 1.4%.
Ahead of the extended weekend break, the main US indexes closed higher on Friday on optimism that a resolution would be reached. The S&P 500 ended up 1.3% at 4,205, the Dow was 1% higher at 33,093 and the Nasdaq was 2.2% higher at 12,976 points.
Central to the debt-ceiling agreement is a two-year budget deal that would essentially cap spending for 2024, while increasing it for defense and veterans, and holding increases at 1% for 2025.
“While the initial reaction is likely to be positive, sentiment will be tempered fact that the deal is not yet over the line, with the next hurdle being Congress where there have already been some rumbles of dissatisfaction,” commented Richard Hunter, head of markets at interactive investor.
“In any event, further developments will be keenly awaited this week as the political saga continues to unfold, and until a definitive agreement is reached, markets are likely to resume something of a holding pattern.”
If a debt ceiling agreement were to be reached this week, Hunter said investors will return to business as usual, with the non-farm payrolls report due on Friday.
The expectation is for 180,000 jobs to have been added in May, as compared to the previous month’s reading of 253,000, he noted.
The release will be one of the last pieces of data input for the Federal Reserve before the upcoming June meeting, where the consensus remains split between a pause and a further hike of 0.25%, given the ongoing strength of recent economic numbers,” Hunter added.
“On Friday, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index came in higher than expected, further muddying the waters.”
Contact the author at stephen.gunnion@proactiveinvestors.com