Stocks Jump As Debt-Ceiling Agreement Fuels Rally
4:03 pm Thursday, October 07th, 2021
The stock market had a great day, as lawmakers work on a bill to extend the debt ceiling by $480 billion, which would get the Treasury to Dec. 3.
The agreement avoids the worst-case scenario where the U.S. defaults on its debt this month, and it gives Congress more time to meaningfully address the issue. Senate Majority Leader Schumer said a vote could happen today. Note, lawmakers will have to pass another continuing resolution by Dec. 3 to avoid a government shutdown.
So, with the debt ceiling potentially being an issue for another day, the market appears to be breathing a sigh of relief. All 11 S&P 500 sectors are trading higher, led by materials (+2.0%), health care (+1.9%), and consumer discretionary (+1.8%). The utilities sector is up just 0.1%.
Other supportive factors have included better-than-expected initial claims data, a report that Pfizer (PFE) asked the FDA to grant emergency use authorization for its COVID-19 vaccine for kids ages 5-11, and Costco (COST) reporting encouraging comparable sales growth in September.
Both initial and continuing claims improved on a weekly basis, with initial jobless claims decreasing by 38,000 to 326,000 (consensus 340,000). The report has fueled selling interest in the Treasury market where the 10-yr yield is up five basis points to 1.57% — matching its recent high.
Interestingly, oil prices ($78.32, +0.88, +1.1%) have turned positive by 1% after trading lower earlier this morning. Neither the bump in rates nor the turnaround in oil has upset market dynamics, although the major indices haven’t made much progress in nearly three hours.
The S&P 500 might be facing some resistance underneath its 50-day moving average (4439). The benchmark index came within ten points of this key technical level earlier today.
