US stocks rise on hopes about the debt ceiling agreement

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US stocks rose on Thursday as lawmakers in Washington boosted traders’ hopes that the debt ceiling will pass through the Senate by the end of the week.

Wall Street’s benchmark S&P 500 rose 1 percent and the heavy Nasdaq Composite rose 1.2 percent, recouping losses from the previous session.

The moves came as investors waited for the Senate to vote on the bill to raise the $31.4 trillion US debt ceiling for two years — the last stage before it is signed into law, to avert a historic government default.

Chuck Schumer, the Senate Democratic leader, said the Senate will remain in session until the debt ceiling bill, which would raise the US borrowing limit and set spending caps for the next two years, is approved.

“We still have to get through the Senate, but I’m more inclined to think that’s a rubber stamp at this point,” said Stephen Innes, managing partner at SPI Asset Management.

“The market here is very well positioned in favor of that happening. Stocks would be percentage points lower if investors suspected there was any hint that this wouldn’t happen.”

Meanwhile, data from the US Department of Labor showed that the number of new applications for unemployment assistance rose to 232,000, but remained at historically low levels despite the slowing economy.

The number was just shy of analysts’ expectations of 235,000 claims, raising hopes that the Fed’s tightening campaign will culminate in a “soft landing,” in which inflation drops without a severe recession.

Two senior Fed officials on Wednesday signaled their support for the central bank to refrain from raising a record interest rate at its June policy meeting.

After dovish comments from Fed Governor Philip Jefferson and Bank of Philadelphia Fed President Patrick Harker, the implied probability of a rate hike at the next meeting has fallen to around 30 percent, but investors are still seeking some chance of a hike at the July meeting.

Meanwhile, shares of software company C3.ai fell 14.2 percent after its quarterly revenue forecast missed estimates, undermining the recent rally on Wall Street over AI-related stocks.

The Stoxx 600 index closed at the level of the European region, up 0.8 percent, while the German DAX index rose 1.2 percent, and the French CAC 40 index rose 0.6 percent.

Traders’ confidence increased after official data showed that inflation across the euro zone slowed more than expected, falling to 6.1 percent in May, the lowest level since Russia’s full-scale invasion of Ukraine more than a year ago. The consensus forecast of economists compiled by Reuters predicted inflation would fall to 6.3 percent.

Core inflation, which excludes energy and food prices, fell from 5.6 percent in April to 5.3 percent in May.

The numbers gave more confidence that the European Central Bank will agree to an increase of just a quarter point when it meets on June 15, and could mark a peak in interest rates in the eurozone.

“A September hike is becoming more and more unlikely, and even a July hike is starting to be questioned,” said Kamil Kovar, chief economist at Moody’s Analytics.

In Asia, China’s CSI 300 index of shares listed in Shanghai and Shenzhen advanced 0.2 percent on the back of an unexpected rebound in a crucial gauge of Chinese factory activity.

The Caixin/S&P Global manufacturing PMI rose to 50.9 in May, in contrast to the official manufacturing PMI released earlier this week, which fell to 48.8. A reading above 50 indicates expansion compared to the previous month.

However, the gains in Hong Kong evaporated and the benchmark Hang Seng index closed down 0.1 percent, having fallen about 20 percent since its January peak, near its lowest since November 2022.

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