The Dow Jones Industrial Average, along with the S&P 500 and the Nasdaq Composite, experienced gains on Thursday following the passage of a crucial debt ceiling bill in the U.S. House of Representatives. The positive outcome of this legislation helped ease concerns over a potential default and shifted investors’ focus towards Friday’s highly anticipated jobs report. In this article, we will analyze the key factors that contributed to the market’s performance and overall sentiment.
Debt Ceiling Bill Eases Market Uncertainty
The U.S. House successfully passed the Fiscal Responsibility Act by a vote of 314-117, garnering bipartisan support. This legislation aimed to raise the debt ceiling, averting a potential U.S. government default. Senate Majority Leader Chuck Schumer, D-N.Y., stated that the Senate would remain in session until the bill reaches President Biden’s desk.
The market responded positively to the news, as the Dow Jones Industrial Average traded up 153.3 points, or 0.47%, to end at 33,061.57. The S&P 500 gained 0.99% to finish at 4,221.02, while the Nasdaq Composite added 1.28% to end at 13,100.98. Both the S&P 500 and Nasdaq closed at their highest levels since August 2022.
Ross Mayfield, an investment strategy analyst at Baird, commented on the impact of the debt ceiling bill, stating, “Anytime a big negative or a big potential negative catalyst is removed, it helps remove some uncertainty from the market.” He also noted that the equity market had largely looked past the debt ceiling issue.
Focus Shifts to Jobs Report and Federal Reserve Policy Meeting
With the debt ceiling crisis averted, investors are now turning their attention to the Federal Reserve’s upcoming June 13-14 policy meeting, which could serve as another market catalyst. Philadelphia Fed President Patrick Harker stated on Thursday that the central bank is nearing the point where it can stop raising interest rates. However, he said earlier in the week that Friday’s payrolls report could impact his vote at the meeting.
Data from ADP revealed that private payrolls grew more than expected in May, while the number of jobless claims filed last week was smaller than economists’ forecasts. The labor market has been closely monitored due to concerns that sustained strength could lead the Fed to raise interest rates again at its policy meeting later this month.
Jamie Cox, managing partner of Harris Financial, explained the shift in focus, stating, “A lot of the market focus is shifting from whether the government is going to default on its debts, which was never going to happen, to the more pressing issue of how much further interest rates are going to rise.”
Nasdaq and S&P 500 Performance
The Nasdaq has seen a nearly 1% increase week-to-date, putting the technology-heavy index on track for six consecutive weekly gains – a streak not seen since January 2020. Meanwhile, the S&P 500 is poised to end approximately 0.4% higher, while the Dow is expected to lose 0.1% on the week.
AI Hype Train Slows Down
The artificial intelligence (AI) hype train, which has been driving the Nasdaq rally since Nvidia’s impressive earnings report, experienced a slowdown after the market closed on Wednesday. C3.ai’s shares tumbled 13% on Thursday following the company’s weaker-than-expected full-year revenue guidance. The AI software developer projected revenue in the range of $295-$320 million, falling short of Wall Street’s expectations of $321 million, according to S&P Global Market Intelligence.
Salesforce and CrowdStrike Shares Stumble
Salesforce saw a 4.66% decline in share price, as investors expressed concerns over the company’s capital expenditure growth of 36% in the quarter. CrowdStrike’s stock slipped 1.6%, as its full-year profit forecast landed on the low end of analysts’ expectations.
Mixed Retail Earnings and Consumer Spending
Retail earnings continued to paint a mixed picture of consumer spending. After the market closed on Wednesday, Nordstrom exceeded analyst expectations, boosting its shares by 4.77% during Thursday’s trading session. However, Macy’s painted a different picture on Thursday morning, as the retailer’s stock rose 1.2% despite lowering its full-year sales and earnings-per-share guidance.
Macy’s chairman and CEO Jeff Gennette commented on the company’s earnings release, stating, “We planned the year assuming that the economic health of the consumer would be challenged, but starting in late March, demand trends weakened further in our discretionary categories.”
Jobless Claims and Unemployment Report
On the economic front, 235,000 jobless claims were filed in the week ending May 27, which was in line with economists’ expectations. Friday’s nonfarm payroll report is expected to show employment growth of 195,000, while the unemployment rate is predicted
