The stock market is singing today with all major indices closing the session on a high note. Why are stocks up today?
Well, it seems speculation that legislators will manage to raise the debt ceiling ahead of the deadline is what has investors so merry today. Indeed, after weeks of uncertainty, it’s starting to look like the U.S. will manage to avoid default after all.
House Speaker Kevin McCarthy met with President Joe Biden on Tuesday after more than a week of waiting. Apparently the meeting went well. On Wednesday, Biden said he was “confident” about coming to terms with Congress to avoid a U.S. default.
“If we look at the broader picture, equities are not priced for a devastating scenario. Ultimately, markets expect a resolution to happen,” Georgios Leontaris, Chief Investment Officer for Europe, Middle East and Africa at HSBC Global told the Financial Times.
It seems this change in narrative is what’s fueling today’s bull rush. The S&P 500, Dow 30 and Nasdaq Composite indices each closed the session up between 1.2% and 1.3%.
Why else are stocks up today?
Why Are Stocks Up Today?
The notion of progress being made on the debt ceiling crisis has been clearly enough to get investors back into tickers. This shouldn’t come as a surprise, given the stagnancy on the matter for the past several months now.
So far, Treasury Secretary Janet Yellen has been ringing the figurative alarm bell that the U.S. may only have until June 1 to raise the debt ceiling before the Treasury runs out of money. If you recall, the Treasury has been paying off the country’s debts since mid-January, when the U.S. went past its $31.4 trillion debt ceiling.
While it’s up to Congress to approve legislation to raise the debt ceiling, Republicans have used the opportunity to levy a range of conditions to sign on to raise the ceiling. This includes government spending limits and work requirements to certain social security programs.
Fed up with the concessions, recently some Senate Democrats sent a letter to Biden asking the President to invoke the 14th Amendment in order to raise the debt ceiling without requiring Congressional oversight. The 14th Amendment contains a statement that “the validity of the public debt, authorized by law […] shall not be questioned.”
It’s a long-shot constitutional workaround to be sure. But given the stubborn stance of some conservative lawmakers, the notion has been gaining some steam among Democrats.
Recently, former President Donald Trump also urged Republican lawmakers to let the country default on its debt unless Democrats concede on major spending cuts.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
