3rd June 2023 – (New York) U.S. stocks posted significant gains on Friday, June 10th, as investors celebrated the passage of a debt ceiling bill by Congress and an encouraging jobs report. The Dow Jones Industrial Average rose by 701.19 points, or 2.12 percent, to 33,762.76. The S&P 500 added 61.35 points, or 1.45 percent, to 4,282.37, while the Nasdaq Composite Index increased 139.78 points, or 1.07 percent, to 13,240.77.
All 11 primary S&P 500 sectors finished in green, with materials, industrials, and energy sectors leading the gainers up by 3.37 percent, 2.96 percent, and 2.96 percent, respectively. Meanwhile, the communication services sector registered the smallest growth of 0.1 percent.
Late Thursday, the U.S. Senate passed a wide-ranging legislation that suspends the debt ceiling until January 1st, 2025, while imposing restraints on federal spending. This ended a drama that risked an unprecedented US default and a financial crisis. The measure now goes to President Joe Biden’s desk for his signature.
Biden could sign the bill suspending the debt ceiling as soon as Saturday, according to White House Press Secretary Karine Jean-Pierre. The Treasury Department has signaled that there is enough time to avoid running out of cash.
The focus now shifts back to how resilient the economy is and whether the disinflation process will resume, said Craig Erlam, senior market analyst at OANDA, a supplier of online multi-asset trading services.
The US stock market also reacted positively to the strong jobs report released on Friday. The Labor Department reported that the US economy added 339,000 jobs in May, exceeding market expectations of 190,000 and April’s upwardly revised rate of 294,000.
The US unemployment rate rose to 3.7 percent in May, up from April’s 3.4 percent. Meanwhile, average hourly earnings rose 0.3 percent in May, with the key inflation indicator growing 4.3 percent on an annual basis, according to the Labor Department.
Many investors are now anticipating that the Federal Reserve might pause its interest rate hikes this month, despite the stronger-than-expected job gains in May, as the labor market report also showed that the unemployment rate rose to 3.7 percent and hourly earnings growth matched consensus forecasts.
Former U.S. Treasury Secretary Lawrence Summers has suggested that the Federal Reserve should be open to raising interest rates by a half percentage point in July if it holds off from tightening credit this month. He believes that the risks of overheating the economy are the primary risks that the Fed needs to be mindful of.