The New York stock market recovered to its highest level in 10 months thanks to the passage of the House of Representatives to raise the federal debt ceiling. The Standard & Poor’s (S&P) 500 index closed at 4,221.02, up 41.19 points (0.99%), and the Nasdaq index, which is centred on technology stocks, jumped 165.70 points (1.28%) at 13,100.98.
The S&P 500 and NASDAQ indexes hit their highest levels since August last year based on closing prices. The agreement to raise the debt ceiling between President Joe Biden and House Speaker Kevin McCarthy (Republican) was passed in the House plenary session the night before with 314 votes in favour and 117 against, which served as a great boon to the market.
Although the Senate threshold remains, investors appear to have been relieved that the possibility of avoiding an unprecedented default (default) situation has increased. As the debt ceiling problem, which has been weighing down the market in recent weeks, has entered the phase of being resolved, there are observations that investors will now focus their attention on the US Federal Reserve System (Fed) again.
Given that inflation and overheating of the labour market in the US are not calming down as quickly as expected, if the Fed maintains its monetary tightening policy for a longer period than originally expected, there is a possibility that it will be negative for the stock market.
With investors focusing all their attention on the May jobs index to be released by the US Department of Labour on the 2nd, private employment in May, which came out a day earlier, increased by 278,000 from the previous month, exceeding the market forecast (170,000) by more than 100,000. This is expected to add weight to the impressionism of hawks (preferring monetary tightening). Nonetheless, the president of the Federal Reserve Bank of Philadelphia (Fed), Patrick Harker, made public remarks on two days in a row, saying, “It is better to take a break from raising interest rates in June.”
Many investors pay attention to the fact that Fed officials with strong voices, such as director Philip Jefferson, who was nominated as the next vice chairman, and President Harker, who has voting rights at this year’s Federal Open Market Committee (FOMC), are taking the lead in advocating a freeze.