Stocks are enjoying a surprise upswing today as investors gain new confidence over debt-ceiling negotiations. Indeed, stock indices like S&P 500 and Nasdaq are up 1% and 1.7%, respectively, ahead of an anticipated debt ceiling deal. Why are stocks up today?
According to a Reuters report from this morning, President Joe Biden and House Speaker Kevin McCarthy are “closing in on a deal” to raise the debt cap for the next two years.
Goldman Sachs’ economic research team released a note to clients on Thursday predicting a deal would be struck before the end of the weekend. This would give Congress until Wednesday to push the legislation into law before the anticipated June 1 default date.
“While it is hard to predict when an announcement could come, we think the odds are highest that a deal is announced late Friday (May 26) or on Saturday (May 27). If so, this would likely allow a House vote late Tuesday (May 30) or Wednesday (May 31). The Senate also needs to pass the deal, though procedural obstacles there are unlikely to be what prevents timely enactment.”
The new debt ceiling reports come as a promising change of pace. If you recall, just a week ago, Biden and McCarthy’s negotiators halted meetings due to a lack of progress. Evidence that the country may once again dodge the throws of a debt default is clearly enough to get investors back to buying.
Why Are Stocks Up Today?
Debt ceiling negotiations aren’t the only reason stocks are in the green currently.
In fact, today’s uptick may be a continuation of yesterday’s Nvidia (NASDAQ:NVDA)-fueled rally. The chipmaker’s stock surged more than 24%, alongside the Nasdaq’s 1.7% jump on Thursday after announcing blowout earnings results. In particular, the tech giant sent investors’ hearts racing after hinting at the revenue potential of the company’s AI sector, especially in data centers.
“We’re seeing incredible orders to retool the world’s data centers. And so I think you’re seeing the beginning of, call it, a 10-year transition to basically recycle or reclaim the world’s data centers and build it out as accelerated computing… and the workload is going to be predominantly generative AI,” said Jensen Huang, Nvidia founder and CEO.
Gap (NYSE:GPS) stock is also one of today’s big winners, up more than 10% after posting its own surprise earnings win on Thursday.
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.
