Stocks swing as debt deal faces next hurdle: Stock market news today

U.S. stocks rallied on Tuesday, kicking off a shortened trading week amid hopes that a hard-won cap-and-trade deal could get through a divided Congress within days.

The S&P 500 (^GSPC) rose 0.15%, while the tech-heavy Nasdaq Composite (^IXIC) gained 0.65%. The Dow Jones Industrial Average (^DJI) was down 0.40% at 12:03 pm ET.

U.S. bond yields lost ground as investors weighed the potential impact of a debt ceiling deal. The yield on the benchmark 10-year Treasury fell to 3.7%. The two-year note yield fell to 4.49% and the 30-year bond fell to 3.89%.

Investors are now watching the debt ceiling deal pass its next critical hurdle, so it can be passed by lawmakers and avoid a damaging default.

President Joe Biden and House Speaker Kevin McCarthy reached a tentative agreement on Sunday to raise the debt ceiling and budget. The deal came after weeks of negotiations, with slow progress roiling markets.

However, the deal faces an initial test Tuesday in the House Rules Committee, which is scheduled to consider the bill before an expected vote in the House on Wednesday, and before it heads to the Senate.

The administration has warned that Congress must raise the debt ceiling by June 5, the so-called “X-date,” or risk pushing the U.S. into the first default in its history.

WASHINGTON, DC – May 28: US President Joe Biden delivers remarks on yesterday’s deal to raise the national debt ceiling with House Speaker Kevin McCarthy in the Roosevelt Room of the White House on May 28, 2023 in Washington. (Photo by Anna Rose Layton/Getty Images)

Even as the clock ticks, Wall Street is playing the waiting game.

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“There’s not much room for error, but if moderates on both sides appear to be in line, a minority on both sides could be vocal against the deal and it still passes,” Jim Reid and colleagues at Deutsche Bank wrote to clients Tuesday morning. “We’ll see how lawmakers react when they come back from the holiday weekend.”

Meanwhile, the main economic release of the week is the US jobs report for May due out on Friday. Economists polled by Bloomberg expected monthly payrolls to fall to 180,000 from 253,000 in April. The unemployment rate is slightly higher at 3.5%.

The jobs report will be scrutinized in the coming weeks for clues as to whether the Federal Reserve will raise interest rates at its next meeting of policymakers on June 13-14. Markets are pricing in a 25 basis point rate hike by July after data last week showed US consumer inflation rose in April.

On the housing front, US home prices rose again month-on-month. The S&P CoreLogic Case-Shiller US National Home Price Index rose 0.4% in March from a month earlier, according to data released Tuesday. It was the second straight gain after seven straight months of price declines.

Separately, consumer confidence fell to a six-month low of 102.3 in May as Americans remain uncertain about the economy. The index fell 1.4 points from a revised 103.7 in the previous month, Conference Board said on Tuesday.

Elsewhere, shares of Nvidia Corp. ( NVDA ) rallied more than 5% to hit a $1 trillion market cap at the open on Tuesday, the day before CEO Jensen Huang unveiled new AI-related products and services.

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Palantir Technologies Inc. gained more than 8% on Tuesday. Other AI-linked stocks rose, including shares of ( PLTR ). Advanced Micro Devices, Inc. (AMD) shares fell, while C3.ai Inc. ( AI ) shares gained more than 17%.

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Danny Romero is a Yahoo Finance reporter. Follow her on Twitter @daniromerotv

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