A trader exits the New York Stock Exchange (NYSE) on Wall Street in New York City on May 12, 2023.
Angela Weiss | Afp | Getty Images
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The rally in the markets on Thursday was driven by bad things that didn’t happen – or at least seemed less likely to happen – rather than good things that did.
- Latest US Debt Ceiling News: House Speaker Kevin McCarthy said the House could vote on the matter as soon as next week. However, some Democrats worry that President Joe Biden is deferring to Republican demands, such as stricter labor requirements for federal aid programs.
- Major US stock indexes rose on Thursday, the second day in a row of advances. European markets also closed higher. Britain’s FTSE 100 added 0.25% despite British telecoms giant BT dropping 5% after it reported disappointing earnings and heavy job cuts.
- The US Supreme Court has left the legal shield protecting tech platforms from being held liable for their users’ posts. It’s a huge relief for tech companies like Meta, Twitter, and Alphabet, but the status of the law remains fraught: US lawmakers want to fix it, believing it protects big tech companies too much.
- Alibaba’s first-quarter revenue rose 2% year-on-year to CNY208.2 billion ($29.6 billion), although the figure fell short of analyst expectations. The Chinese tech giant also announced plans to spin off its cloud division as a separate, publicly traded company. Investors weren’t satisfied with what they heard: Shares of the US-listed company fell 5.4%.
- forefront Gold prices may have fallen in May, but UBS Global Wealth Management believes the metal could reach a record high of $2,100 an ounce. There are three reasons why UBS is so bullish on gold.
The markets witnessed the second positive day in a row, trying to put the losses of the past two weeks behind them. The S&P 500 was up about 1%, the Dow Jones Industrial Average was up 0.34%, and the Nasdaq Composite was up 1.5%.
With these numbers, the S&P and Nasdaq reached their highest levels since August 2022.
The rally in the markets on Thursday was driven by bad things that didn’t happen – or at least seemed less likely to happen – rather than good things that did. It is a reminder to investors that markets are often moved more by expectations than by actual events.
First, the probability of a US debt default is the lowest since discussions began in Washington. House Speaker McCarthy’s positive remarks on Thursday fueled optimism that the US will reach an agreement on the ceiling before June 1, when the country becomes unable to pay its debts.
Then, the Supreme Court decided not to remove the legal shield protecting tech companies from prosecution over their users’ posts. The companies most affected by the ruling rose with relief: Alphabet, which owns YouTube, added 1.65%, and Meta, Facebook’s parent company, rose 1.8% to a 52-week high (although the stock was also hit by Meta’s new AI). . Chips).
Yesterday was also a busy day for the Fed’s speakers.
Dallas Fed President Lori Logan, a voting member of the Federal Open Market Committee, believes that economic data does not support a pause in rate hikes. “It’s a long way from here to 2% inflation,” Logan said, noting that the inflation reading for the last quarter was, in fact, higher than the fourth quarter of 2022. St. Louis Fed President James Bullard even suggested higher rates like “ insurance against inflation.
Treasury yields rose in response to the comments, but investor relief around the debt ceiling was so strong that stock indexes were little affected by interest rates. As always, avoiding defeat can be more powerful than outright victory.
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