Investors in the US are hoping Congress may temporarily raise the federal government’s debt limit
US Equity Futures All sectors were trading higher in a healthy turnaround after a morning marked with wide losses.
Investors in the US are hoping Congress can temporarily raise the federal government’s debt limit and buy lawmakers time to reach a more permanent solution. The market recovered from a 460-point loss soon after Senate Republican leader Mitch McConnell offered Democrats an emergency short-term extension to the federal debt limit in December.
Financial markets have mostly braced for debt-ceiling drama, with another 11-hour resolution expected, but some voices on Wall Street have recently warned investors to prepare for a default, though unlikely. Given how damaging it would be to the economy. and market.
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Jay Hatfield, CEO, Infrastructure Capital Advisors, said, “People were nervous about the loan limit.
The S&P 500 rose 0.4% to 4,363.55. Gains in technology stocks, makers of home goods and communications companies helped offset losses in energy and other sectors. Nearly 57% of the stocks in the index gained.
The Dow Jones Industrial Average rose 0.3% to 34,416.99. The Nasdaq closed up 0.5% at 14,501.91. The tech-heavy index was down 1.2% before the afternoon rally.
A gauge of confidence in economic growth, shares of the smaller company declined: the Russell 2000 Index lost 0.6% to 2,215.
If the country’s debt limit, which is the limit on the amount the federal government can borrow, is not raised by October 18, the country will face “a financial crisis and an economic downturn,” Treasury Secretary Janet Yellen said last year. Weeks told Congress.
During a meeting with bank officials on Wednesday, President Biden stressed the importance of Congress raising the loan limit.
“We as a country have not failed to do this since our inception. We need to act. These leaders know the need to act.”
The Senate went into recess late Wednesday so lawmakers could discuss McConnell’s proposal, delaying a procedural vote on a bill passed by the House to suspend debt limits.
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The latest bout of market volatility comes as investors question the economy’s path ahead amid rising inflation and the ongoing impact from the virus pandemic. Bond yields have remained relatively stable since the sharp jump late last month, prompting concerns that high inflation could last longer than economists and investors anticipated.
High on Wall Street’s list of concerns is the Federal Reserve’s timetable to raise interest rates. The Fed’s policymaking committee recently indicated that the central bank could start raising rates at the end of next year. Analysts have said the Fed may act sooner than expected if high inflation persists.
Investors will take a closer look at how the companies fared in the third quarter when quarterly financial results are released in the coming weeks. Wall Street is expecting solid profit growth of 27% for the S&P 500 companies, but will also be listening for comment on how supply chain problems and high costs are weighing operations down.
The Labor Department will release its projected employment report for September on Friday. The labor market has been slow to make a full recovery from the pandemic and a summer surge in COVID-19 cases has further hindered its progress.
Meanwhile, Asian stocks rose on Thursday, tracking a rally on Wall Street following signs of progress in resolving the impasse in Congress over debt limits.
Japan’s benchmark Nikkei 225 rose 1.6% to 27,972.58 in morning trade. Australia’s S&P/ASX 200 rose 0.8% to 7,262.30. South Korea’s Kospi jumped 1.3% to 2,944.57. Hong Kong’s Hang Seng rose 2.2% to 24,491.36. Business in Shanghai was closed due to a Chinese national holiday.
Stephen Schwartz, a senior Fitch director, said he believed the regional economy would begin to recover with increased vaccination efforts in Asia, meaning restrictions to stem the spread of the coronavirus would be lifted.
But southern and southeast Asia, where vaccination rollouts have lagged, are vulnerable to “pandemic-related shocks” from COVID-19. He said the recent problems in China’s property sector are another risk.
“Slower growth in China, as expected by the US Fed, could have broader negative repercussions, especially for emerging and frontier markets in the region,” he said.
Japan’s economic prospects also remain unclear as new Prime Minister Fumio Kishida will deliver his first policy speech later this week. Although he has promised to boost earnings, did not outline specifics and is not widely regarded as a proponent of regulatory and structural changes analysts have long said Japan desperately needs. Some skeptics worry that any new spending will only push the country into deep debt.
Kishida has also surprised investors by raising her voice in support of the capital gains tax.
Benchmark US crude slipped 45 cents to $76.98 a barrel in energy trading on the New York Mercantile Exchange. It declined from $1.50 to $77.43 a barrel. International benchmark Brent crude fell 21 cents to $80.87 a barrel.
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In currency trading, the US dollar rose from 111.40 yen to 111.45 Japanese yen. The euro was little changed at $1.1557.
AP Business Writers Damien J Trois and Alex Veega contributed.