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Debt-Ceiling Deal Reached by Biden and House Republicans
President Joe Biden and House Republicans have reached a tentative agreement to raise the government’s debt limit. This is good news for the U.S. economy and ongoing stock market rally. The debt-ceiling deal would head off a looming default on U.S. sovereign debt. The overall weekly action was mixed, with breadth at times startlingly weak. A number of leading stocks struggled. The Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.
Debt-Ceiling Deal Details
After weeks of negotiations, Biden and House Speaker Kevin McCarthy sealed the debt-limit deal in principle Saturday night. The agreement includes a two-year debt-limit increase and will keep non-defense, non-veterans discretionary spending about flat with current levels over two years, multiple reports said, citing sources. It would also impose some new restrictions on certain government aid. “We still have a lot of work to do, but I believe this is an agreement in principle that is worthy of the American people,” McCarthy told reporters. McCarthy said he plans a House vote on the legislation on Wednesday, which will likely face objections on the right and left. Treasury Secretary Janet Yellen said a debt-limit hike must come by June 5 to avoid a likely U.S. default.
Stocks to Watch
Various stocks are trading near buy points, including Tesla (TSLA), Netflix (NFLX), Arista Networks (ANET), On Semiconductor (ON), NetEase (NTES), Mobileye (MBLY), Smartsheet (SMAR), Aehr Test Systems (AEHR) and McKesson (MCK). NVDA stock is on IBD Leaderboard. MBLY stock, and Smartsheet are on the IBD 50. Arista Networks was Friday’s IBD Stock Of The Day. SMAR stock was Thursday’s selection.
Dow Jones Futures Today
Dow Jones futures will open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures. How will futures react to the debt-limit deal? A default would have been devastating, but markets had already rallied to some extended on optimism that a compromise would be reached in time. U.S. stock markets will be closed Monday in observance of the Memorial Day holiday. But other exchanges around the world will be open. Dow futures also will trade normally on Monday. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally
The stock market rally was struggling midweek amid debt-ceiling concerns, but bounced back as Nvidia triggered an AI revolution and default fears eased. Even so, the indexes closed mixed. The Dow Jones Industrial Average fell 1% in last week’s stock market trading. The S&P 500 index edged up 0.3%. The Nasdaq composite jumped 2.5%. The small-cap Russell 2000 closed flat. The 10-year Treasury yield climbed 13 basis points for the week to 3.82%, the highest point since early March. The odds of a Fed rate hike next month have jumped to 70%. U.S. crude oil futures rose 1.4% to $72.67 a barrel last week. Copper prices fell 1.3%, but rebounded from 2023 lows, jumping 2.6% on Friday.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 3.4%, with SMAR stock a small holding. The VanEck Vectors Semiconductor ETF (SMH) exploded for a 10.55% gain with Nvidia a major holding and ON stock also in the ETF. Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 1% last week and ARK Genomics ETF (ARKG) 3%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs. SPDR S&P Metals & Mining ETF (XME) fell 2.9%% last week to a nine-month low. The Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.8%.
Five Best Chinese Stocks to Watch Now
There are Tesla stock, Youdao, Baidu, iQIYI, and KraneShares CSI China Internet ETF.
Other Stocks Near Buy Points
Various stocks could be actionable, including ANET stock, Netflix, On Semiconductor, NetEase, and Mobileye. Tesla, Aehr Test Systems, Smartsheet, and MCK stock are all close to being actionable.
Conclusion
News of the debt-ceiling deal has provided a much-needed boost to the US economy and ongoing stock market rally. This deal will head off a looming default on US sovereign debt while keeping non-defense, non-veterans discretionary spending about flat with current levels over two years. Investors should keep a close eye on various stocks near buy points and anticipate the effects of trading and futures next market session.
FAQs
What is the debt-ceiling deal?
The debt-ceiling deal is an agreement between President Joe Biden and the House Republicans. It involves a two-year debt-limit increase, keeping non-defense, non-veterans discretionary spending about flat with current levels over two years, and some new restrictions on certain government aid.
When is the House vote on the legislation for the debt-ceiling deal?
McCarthy said he plans a House vote on the legislation on Wednesday, which will likely face objections on the right and left.
What are the stocks to watch currently?
Various stocks are trading near buy points, including Tesla (TSLA), Netflix (NFLX), Arista Networks (ANET), On Semiconductor (ON), NetEase (NTES), Mobileye (MBLY), Smartsheet (SMAR), Aehr Test Systems (AEHR), and McKesson (MCK).
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