(New York) The New York Stock Exchange ended sharply higher on Friday anticipating a very soon agreement on the debt ceiling in the United States and ignoring the bad news on the side of inflation for the moment.
The NASDAQ, where technology stocks are concentrated, led the rise, gaining 2.19% to 12,975.69 points to reach its highest level of the year. The Dow Jones took 1.00% to 33,093.34 and the S
As the window of opportunity narrows to avoid an American default, the White House and the Republican opposition continued Friday to build a compromise.
“We’re closer (to an agreement), but it’s not done yet,” said a source familiar with the talks, skeptical of the possibility of an announcement as early as Friday.
The agreement would freeze some spending, but without touching defense and veterans budgets, the New York Times and Washington Post reported.
“The market has soared on hopes ‘that Republicans and Democrats’ ‘will announce a deal very soon that will avert the default,’ commented Peter Cardillo of Spartan Capital.
The markets have surfed on this optimism and also continued to be carried by the enthusiasm that the development of artificial intelligence is generating for technology stocks and those of semiconductor manufacturers.
However, an inflation indicator in the United States came as a surprise by accelerating more strongly than expected in April. The PCE index, the Fed’s preferred measure of rising prices, rose 4.4% year on year, from 4.2% the previous month.
More worryingly, the underlying index, which excludes the volatile food and energy price sectors, accelerated to 4.7%.
These strong inflation figures considerably dampen the possibility of a sustained pause in interest rate hikes, as the markets had been pricing in, but the indices have not budged, remaining focused on the prospect of a political agreement. on the debt.
The inflation data “was very disappointing,” said Peter Cardillo. “Obviously, the rise in prices remains stubborn and once we have applauded an agreement on raising the debt ceiling, we will have to face these macro-economic data and be interested in what will happen next. the Fed,” the analyst added.
“Today’s inflation number confuses ideas of a pause in rate hikes,” Cardillo said as the Fed meets June 13-14. “It’s not completely ruled out, but it will be a short break and the Fed will revisit the issue in July,” he said.
To add to the persistence of inflation, the IMF, which slightly raised its growth forecast for the United States on Friday to 1.7% in 2023, also warned that underlying inflation “will remain significantly above the 2% target (of the Fed) in 2023 and 2024”. The institution thus invites to keep interest rates at a high level between 5.25% and 5.5% “until the end of the year 2024”.
On the stock market, chipmaker Marvell Technology soared 32.42% to $65.51 after positive feedback on the AI’s buoyant momentum. Nvidia, an industry leader in dedicated AI processors, gained another 2.54% after gaining more than 24% the previous day on ambitious Q2 projections.
In sympathy with the semiconductor industry, maker Broadcom climbed 11.52%. A multi-billion dollar contract was announced Wednesday between Apple and Broadcom for the order of components used to capture 5G, the fifth generation of mobile phones. Apple gained 1.41%.
Struggling ready-to-wear brand Gap soared 12.33% to $8.34 after a surprise first-quarter profit at the cost of all-out restructuring.
The Toronto Stock Exchange closed on Friday with a gain of nearly 150 points, supported by general strength, while the major American indices also advanced, boosted by technology stocks.
Markets ended the day in the green as negotiators in the US debt ceiling talks looked closer to a deal, as the US government moves closer to a date when it could find itself in short of cash. The talks have added uncertainty to the market as a deadline nears, as the nation could slide into potentially catastrophic default if a deal is not reached.
The composite index S
“Right now, the market is looking for any excuse to go up,” observed Pierre-Benoît Gauthier, assistant vice-president of investment strategy at IG Wealth Management.
However, even though markets ended the week on a positive note, new data released on Friday indicates that central banks’ inflation fight may not be over, Gauthier warned.
He pointed to a key U.S. price index rising in April as consumer spending proved resilient.
As the next Federal Reserve meeting nears, investor optimism about a pause in rate hikes is waning, he added.
“A few weeks ago we were certain June would be a break,” Gauthier said, but now the market is pricing a 40% chance of a June upside as economic data increasingly paints the picture of persistent inflation.
“Each datum is higher than we thought,” he said. The fight may not be over. »
If the Fed raises interest rates again, the Bank of Canada will be in a difficult situation since the gap between the monetary policies of the two banks will widen, observed Mr. Gauthier.
Meanwhile, Germany entered a recession, providing a glimpse of what investors largely believe to be the future of the United States, Gauthier continued, calling it “the most predictable recession we’ve had.” seen “.
Tech stocks continued to outperform the market on Friday, with the NASDAQ rising more than 2%.
“The market is looking for any growth it can find,” Gauthier noted.
In the forex market, the Canadian dollar traded at an average rate of 73.41 US cents, up from 73.38 US cents on Thursday.
On the New York Commodities Exchange, crude oil prices rose 84 cents US to US$72.67 per barrel, while natural gas fell 6 cents US to US$2.42 per million. BTUs.
The price of gold rose 60 cents US to US$1944.30 per ounce and that of copper rose 9 cents US to US$3.68 per pound.
