After moving sharply higher to close out the previous week, stocks are likely to see further upside in early trading on Tuesday. The major index futures are currently pointing to a higher open for the markets, with the S&P 500 futures up by 0.7 percent.
Stocks are likely to benefit from news President Joe Biden and House Speaker Kevin McCarthy, R-Calif., reached an agreement in principle to raise the debt ceiling and avoid a potentially disastrous default by the U.S. government.
Biden called the deal an “an important step forward that reduces spending while protecting critical programs for working people and growing the economy for everyone.”
“The agreement represents a compromise, which means not everyone gets what they want. That’s the responsibility of governing,” Biden said.
He added, “And, this agreement is good news for the American people, because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost.”
Meanwhile, McCarthy accused Biden of wasting time by refusing to negotiate for months but said they have reached an agreement that is “worth of the American people.”
McCarthy claimed the debt limit agreement “stops Democrats’ reckless spending, claws back unspent COVID funds, and blocks Biden’s new tax schemes.”
A source familiar with the negotiations told CNN the agreement in principle will raise the debt ceiling for two years and keep non-defense spending roughly flat for fiscal 2024 and increase it by 1 percent in fiscal year.
The deal also reportedly includes White House concessions on work requirements for people receiving food stamps.
The source told CNN the agreement reached phases in food stamp time limits on people up to age 54 that will then sunset in 2030, while also exempting veterans and the homeless from these limits.
Biden said negotiating teams will finalize the legislative text over the next day and urged both the House and Senate to pass the agreement “right away.”
The agreement is likely to face opposition from some Republicans who were seeking bigger spending cuts, potentially prolonging the process of passing the bill.
McCarthy told reporters Saturday evening that he expects the GOP-controlled House to vote on the agreement on Wednesday.
The last-minute agreement comes as lawmakers purportedly face a June 5 deadline, when Treasury Secretary Janet Yellen has warned the U.S. will no longer be able to pay its bills.
Stocks moved sharply higher over the course of the trading day on Friday, extending the rebound seen during Thursday’s session. With the continued upward move, the Nasdaq and the S&P 500 reached their best closing levels in nine months.
The major averages moved roughly sideways going into the close, holding on to strong gains. The Nasdaq spiked 277.59 points or 2.2 percent to 12,975.69, the S&P 500 surged 54.17 points or 1.3 percent to 4,205.45 and the Dow jumped 328.69 points or 1.0 percent to 33,093.34.
The jump by the Dow came after the blue chip index bucked Thursday’s uptrend and edged down to its lowest closing level in almost two months.
The major averages turned in a mixed performance for the week. While the Dow slumped by 1.0 percent, the S&P 500 rose by 0.3 percent and the tech-heavy Nasdaq soared by 2.5 percent.
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan’s Nikkei 225 Index rose by 0.3 percent, while China’s Shanghai Composite Index inched up by 0.1 percent.
The major European markets have also turned mixed on the day. While the German DAX Index is up by 0.5 percent, the French CAC 40 Index is down by 0.4 percent and the U.K.’s FTSE 100 Index is down by 0.5 percent.
In commodities trading, crude oil futures are falling $0.73 to $71.94 a barrel after climbing $0.84 to $72.67 a barrel last Friday. Meanwhile, after inching up $0.80 to $1,963.10 an ounce in the previous session, gold futures are rising $16.80 to $1,979.90 an ounce.
On the currency front, the U.S. dollar is trading at 139.77 yen versus the 140.45 yen it fetched on Monday. Against the euro, the dollar is trading at $1.0736 compared to yesterday’s $1.0708.
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