Skip to content

US Stock Market Uplift: Debt Crisis Avoided and Anticipation of May Jobs Data

The US narrowly avoided a catastrophic debt default, causing stock index futures to rise. This crucial event now paves the way for the upcoming payroll data, set to shape the future actions of the Federal Reserve.

Monitors showing NYSE stocks
Monitors showing NYSE stocks

Senate's Crucial Move: Lifting the Debt Ceiling

The Senate successfully passed a bill on Thursday, effectively raising the government's debt ceiling of $31.4 trillion, thereby averting what would have been a devastating first-ever default. This strategic move has diverted the imminent financial crisis, providing stability to the stock market.

Fed's Rate-Hike Dilemma: A Closer Look at May's Jobs Data

Following this, all eyes are now on the upcoming jobs data. The data, anticipated to show a slowdown in job growth in May and cooling wages, might influence the Federal Reserve to refrain from a rate hike this month. This would be a first since the Fed began its assertive policy tightening over a year ago.

Anticipating a Tight Labor Market: The Unemployment Forecast

The Labor Department's forthcoming employment report, due at 0830 ET, is expected to further illuminate this scenario. The report is likely to underscore a robust labor market, projecting an increase in the unemployment rate from 3.4% in April to 3.5% in May. It also predicts non-farm payrolls to have increased by 190,000 jobs in May, a slight decline from April's rise of 253,000.

Fed's June Meeting: Expectations of Steady Interest Rates

Considering this, futures trading of Fed funds has shown over a 70% likelihood that the Fed will maintain steady interest rates at its policy meeting slated for June 13-14. This assurance follows the averted debt default, permitting the Fed to focus on other key aspects rather than the potential risks associated with a US debt default.

Megacap Stocks Pre-market Rise: A Boost for Growth Companies

The optimism in the market was reflected in the pre-market performance of major stocks, including Microsoft Corp, Apple Inc, Tesla Inc, and Meta Platforms, which saw a rise between 0.3% and 1.3%. Growth companies, more reliant on borrowed money, stand to gain from this low-rate environment.

Nike logo
Nike logo

Sportswear Giants Riding High: Lululemon and Nike Enjoying the Lift

Benefitting from this uplift, Lululemon Athletica Inc saw a remarkable surge of 14.7% after elevating its annual sales and profit forecasts. Despite high inflation, the upscale activewear company has managed to attract wealthy American customers. This positive trend also extended to other sportswear companies, with Nike Inc in the US and Adidas and Puma in Europe experiencing a rise in their shares.

Chipmaker Broadcom's Mixed Forecast: Contrasting Nvidia's Blockbuster Guidance

However, not all corporations enjoyed positive results. Broadcom Inc shares dipped by 0.6% after announcing its quarterly results. Despite forecasting revenue above market expectations for the third quarter, analysts found the outlook disappointing, especially when compared to the blockbuster guidance provided by Nvidia Corp last week. In contrast, shares of Nvidia, the world's most valuable chipmaker, experienced a rise of 1.4%.