US stocks were mostly higher Tuesday at the open, kicking off a shortened trading week amid hopes the hard-won deal-ceiling deal will get through a divided Congress in a matter of days.
The S&P 500 (^GSPC) was up 0.51%, while the technology-heavy Nasdaq Composite (^IXIC) rose 1.11%. The Dow Jones Industrial Average (^DJI) was flat.
US bond yields lost ground as investors assessed the potential impact of the debt limit deal. The yield on the benchmark 10-year Treasury dropped to 3.7%. The two-year note yield slipped to 4.5%, while that on the 30-year bond dropped to 3.9%.
Investors are now watching for the debt ceiling deal to get over its next crucial hurdle so it can be passed by lawmakers and avert a harmful default.
President Joe Biden and House Speaker Kevin McCarthy reached a tentative agreement on Sunday to raise the debt ceiling and the budget. The deal came after weeks of negotiations, slow progress that rattled markets.
Still, the agreement faces an early 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 goes to the Senate.
The administration has warned that Congress must raise the debt ceiling by June 5 — the so-called “X-date” — or risk tipping the US into the first default in its history.
Even as the clock ticks down, Wall Street is playing the waiting game.
“There’s not much room for error but with moderates on both sides seemingly in line, then there can be a vocal minority on both sides against the deal and it still passes,” Jim Reid and colleagues at Deutsche Bank wrote to clients Tuesday morning. “We will see how lawmakers react as they come back from the holiday weekend.”
Meanwhile, the major economic release of the week will be the US jobs report for May due out on Friday. Economists polled by Bloomberg expect a drop in monthly payroll additions to 180,000, from 253,000 in April. The unemployment rate is seen inching up slightly to 3.5%.
The jobs report will be pored over in coming weeks for clues to whether the Federal Reserve will raise interest rates at the next meeting of policymakers, set for June 13-14. Markets are pricing in a rate hike of 25 basis points by July after data last week showed US consumer inflation accelerated in April.
On the housing front, US home prices again increased month over month. The S&P CoreLogic Case-Shiller U.S. National Home Price index rose 0.4% in March compared with the previous month, according to data released on Tuesday. That was the second straight month of gains after seven consecutive months of price declines.
Elsewhere, shares of NVIDIA Corporation (NVDA) rallied over 3%, hitting a $1 trillion market cap at the open Tuesday after CEO Jensen Huang unveiled a host of new AI-related products and services the previous day.
Other stocks linked to AI rose, including Palantir Technologies Inc. (PLTR) shares, which gained more than 5% Tuesday. Advanced Micro Devices, Inc. (AMD) shares climbed more than 1%, while C3.ai Inc. (AI) shares gained more than 14%.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
