U.S. stocks rally as debt ceiling progress in U.S. Congress cheers investors

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2nd June 2023 – (New York) On Thursday, major U.S. stock indexes rallied as investors welcomed the progress made in Congress towards resolving the debt ceiling issue. The Dow Jones Industrial Average rose by 153.30 points, or 0.47 percent, to 33,061.57. The S&P 500 added 41.19 points, or 0.99 percent, to 4,221.02. The Nasdaq Composite Index increased by 165.70 points, or 1.28 percent, to 13,100.98.

Nine of the 11 primary S&P 500 sectors ended the day in green, with technology and industrials leading the gainers by rising 1.33 percent and 1.26 percent, respectively. Meanwhile, utilities and consumer staples lost 0.78 percent and 0.09 percent, respectively.

The stock market’s positive performance was largely due to the House of Representatives passing a debt ceiling bill on Wednesday night. The bill, called the Fiscal Responsibility Act, was passed by a vote of 314-117, marking a significant step towards averting a potential default. The legislation now heads to the Senate.

The Senate will stay in session until we send a bill avoiding default to President Biden’s desk,” said Senate Majority Leader Chuck Schumer. “Any change to this bill that forces us to send it back to the House would be unacceptable.”

The positive market sentiment was also boosted by comments from central bankers suggesting that there might be no need to hike interest rates again at the Federal Reserve‘s 13th-14th June policy meeting.

On Thursday, Philadelphia Federal Reserve President Patrick Harker said that he thinks the Fed is near the point of being able to stop raising interest rates. This comment came one day after Harker said it might be appropriate to “skip” a rate hike in June.

St. Louis Federal Reserve President James Bullard also wrote in an analysis published on Thursday that the monetary policy is in much better shape now, with interest rates “at a more appropriate level than it was a year ago.”

Investors were also digesting a flurry of new economic data, which provided further insight into the U.S. labour market. The labor market has been a closely watched sector given concerns that a tight situation could compel the Fed to raise rates again.

According to payroll data company Automatic Data Processing (ADP), private companies in the United States added 278,000 jobs in May, surpassing economists’ expectations of 170,000 jobs.

However, the U.S. Department of Labor reported on Thursday that new jobless claims rose to 232,000 in the week ending 27th May, compared with the previous week’s revised level of 230,000.

The Federal Reserve will meet on 14th June, and members appear divided as to what action the Fed will take, said Kenny Fisher, senior market analyst at OANDA, a supplier of online multi-asset trading services.

“U.S. economic data has been solid, making it more difficult for the Fed to take a pause,” said Fisher.