[New York Stock Market] Rise on Optimism for US Debt Negotiations... Nasdaq Up 1.51%

The three major indices of the U.S. New York stock market all closed higher on the 18th (local time) as optimism surrounding the debt ceiling increase agreement continued.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 115.14 points (0.34%) from the previous close to finish at 33,535.91. The large-cap focused S&P 500 index gained 39.28 points (0.94%) to close at 4,198.05, while the tech-heavy Nasdaq index climbed 188.27 points (1.51%) to end at 12,688.84.

Within the S&P 500, technology, communication, and discretionary consumer stocks showed a rally. Walmart, which released earnings before the market opened, closed up 1.30% on better-than-expected results. Walmart also raised its annual guidance. Video game company Take-Two Interactive Software surged more than 11% on strong earnings. Micron rose 4% after news emerged the previous day about its semiconductor plant investment in Hiroshima, Japan. Netflix also rose more than 9%.

[Image source=Reuters Yonhap News]

Investors closely monitored the debt ceiling increase discussions, Federal Reserve (Fed) officials’ remarks, economic indicators, and corporate earnings to gauge the future economic outlook and monetary policy direction.

Expectations for a debt ceiling increase agreement rose further after Republican House Speaker Kevin McCarthy said the agreement could be put to a vote as early as next week. The New York stock market, which had been weak due to Fed tightening concerns, turned sharply higher after McCarthy’s remarks were made public in the morning. McCarthy stated, "I see a path to an agreement," adding, "There is a structure (for an agreement) and everyone is working hard." He had also appeared on CNBC the previous day, saying, "I don’t think there will be a default." However, caution remains as the so-called X-day, when cash runs out, approaches on July 1, and the final passage of the bill still needs to be watched.

Jeff Kilburg, CEO of KKM Financial, said, "The U.S. government will not go into default," adding, "There is optimism in the market, but also optimism that they will find a way forward."

Walmart’s better-than-expected first-quarter earnings and raised annual guidance also supported a recovery in investor sentiment. However, recent economic data and hawkish remarks from Fed officials, which do not point to a June rate pause, have raised tightening concerns.

Lorie Logan, president of the Dallas Federal Reserve Bank and considered a moderate within the Fed, said in the morning that recent economic data do not support a rate pause at the June FOMC meeting. She stated, "We have made some progress by raising rates in the last 10 FOMC meetings," adding, "In the coming weeks, data may show that skipping (a rate hike) is appropriate, but at this point, it is not yet time."

On the same day, Fed Governor Philip Jefferson also said, "Inflation is too high." James Bullard, president of the St. Louis Fed and known as a prominent hawk within the Fed, supported tightening in a foreign media interview, saying, "The pace of inflation slowdown is slower than expected. We need to take out insurance by raising rates a bit more."

Market expectations for a June rate pause have somewhat weakened. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of the afternoon, federal funds futures market prices reflect about a 65% chance that the Fed will hold rates steady in June. This betting has clearly declined from around 71% the previous day and about 89% a week ago. Conversely, the probability of an additional baby step (a 0.25 percentage point rate hike) has risen from the 10% range a week ago to 28% the previous day and about 35% on this day.

Art Hogan, chief market strategist at B. Riley Wealth Management, said, "One comment that shook the market a bit this morning was from Lorie Logan, president of the Dallas Fed." The Fed, which declared war on inflation, has raised the U.S. benchmark interest rate to 5.0-5.25% through 10 consecutive rate hikes since March last year.

The weekly initial jobless claims in the U.S. released on the day decreased. According to the U.S. Department of Labor, last week’s claims fell by 22,000 from the previous week to 242,000, below Wall Street’s forecast of 255,000. Continuing claims, which count those applying for unemployment benefits for at least two weeks, decreased by 8,000 to 1.8 million. This suggests that despite the Fed’s aggressive tightening, unemployment has not risen as much as expected, indicating the labor market remains robust. Local media also analyzed that the recent large-scale fraud suspicions in Massachusetts and crackdowns by state authorities partially influenced these results.

In the New York bond market, Treasury yields rose after Fed officials’ remarks raised tightening expectations. The 10-year U.S. Treasury yield rose to around 3.65%. The 2-year Treasury yield, sensitive to monetary policy, climbed to about 4.25%. The dollar index, which shows the value of the dollar against six major currencies, rose more than 0.6% from the previous close to around 103.5.

International oil prices fell as the dollar strengthened amid tightening concerns. On the New York Mercantile Exchange, June delivery West Texas Intermediate (WTI) crude oil closed at $71.86 per barrel, down 97 cents (1.33%) from the previous close.

This content was produced with the assistance of AI translation services.