On Friday, the stock market experienced an increase in prices as traders became hopeful that lawmakers would soon reach a deal to raise the U.S. debt ceiling, thereby averting a potentially disastrous default. The Dow Jones Industrial Average rose by 1%, or 328.69 points, to settle at 33,093.34. The S&P 500 also experienced a gain of 1.3% and closed at 4,205.45, while the Nasdaq Composite rose by 2.2% to close at 12,975.69. The tech and consumer discretionary sectors of the S&P 500 both increased by more than 2%, and Intel and American Express led the Dow higher with increases of 5.8% and 4.1%, respectively. This is the fifth straight weekly gain for the Nasdaq, which rose by 2.5%. The S&P 500 also experienced a one-week advance, increasing by 0.3%. However, the Dow was the laggard this week, experiencing a loss of 1%.
Negotiations on a Debt Ceiling Deal
Congressional and Biden administration negotiators were closing in on a deal that would raise the U.S. debt limit for two years. Talks took place on Thursday night, and House Speaker Kevin McCarthy stated that there was progress, but more progress needed to be made. Treasury Secretary Janet Yellen had warned that the U.S. could default as early as June 1 if the debt ceiling was not raised, and economists and Wall Street leaders had expressed concern over the potentially devastating effects of a U.S. debt default.
Impact of Debt Ceiling Deal on the Economy
Once a debt deal has been reached, the markets will have to confront the fact that the Federal Reserve is likely to damage the economy. According to Ed Moya, senior market analyst at Oanda, the tightening phase could last until the end of summer, which would result in larger rate cuts next year.
Inflation Data
New data that emerged on Friday morning showed that inflation had risen more than expected in April. The Federal Reserve’s preferred gauge of price pressures, the personal consumption expenditures index, increased by 0.4% last month and by 4.7% from a year earlier.
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