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The S&P 500 rises after a debt ceiling deal is agreed and the bill heads to Congress.

US futures

Dow futures -0.05% at 33085

S&P futures +0.25% at 4227

Nasdaq futures +0.86% at 14486

In Europe

FTSE -0.38% at 7583

Dax +0.07% at 16018

• The debt ceiling bill is agreed upon & heads to Congress
• Tesla jumps on Musk in China news
• USD falls as treasury yields drop
• Oil drops ahead of OPEC+ this week
   

Debt ceiling bill, hawkish Fed bets & US consumer confidence data due

US stocks are pointing to a stronger start jumping on hopes that a US debt default will be avoided and as chip stocks continue to charge higher.

President Biden and House Speaker Kevin McCarthy agreed on a deal to lift the $31.4 trillion debt ceiling, which now must be approved by Congress. This is unlikely to be an easy ride, given the Republican control over the House and the Democrat control of the Senate. Still, with every move forward, there is less risk of a US debt default.

The House Committee will meet at 3 pm ET (19:00GMT) to discuss the debt ceiling bill. While some hard-line Republicans have said that they will oppose the bill, the market remains upbeat.

The upbeat mood is helping stocks rise higher, extending gains from last week, after Nvidia’s impressive outlook.

Looking ahead, US consumer confidence data is due and is expected to fall to 99 in May from 101.3. The data comes after core PCE data, the Fed’s preferred inflation gauge unexpectedly rose in April to 4.7%, fuelling Fed rate hike bets.

The market is now pricing in a 59% probability of a rate hike in June up significantly from last week. Multiple rate cuts are no longer expected this year.
 

Corporate news

Tesla rises 3% pre-market after Elon Musk reportedly arrived in China to meet with Chinese officials and visit the Shanghai plant. This comes after Tesla and Ford announced a partnership giving Ford access to Tesla supercharges.

Ford rises over 2% after Jefferies upgrades the stock thanks to a strong plan and management to help close the gap with rivals.

Nvidia continues its drive towards a $1 trillion market cap as continues to rally following its impressive earnings report last Wednesday.
 

S&P 500 outlook – technical analysis

The S&P500 has been trending higher, forming a series of higher highs. The price pushed above resistance at 4210, which, together with the RSI above 50 keeps buyers hopeful of further upside. Bulls will look towards 4285, the August 19 high, ahead of 4325, the August 2022 high. Meanwhile, immediate support can be seen at 4210, last week’s high. A break below here exposes the 20 sma and rising trendline support at 4145.
 

FX markets – USD falls, EUR rises

The USD is falling, giving back earlier gains as treasury yields fall. As optimism surrounding a debt deal improves and risks recede, the risk premium in government debt is falling, suggesting it was priced in, pulling the USD lower.

EUR/USD is rising despite mixed data from the region. Spanish inflation cooled by more than expected in May to 3.2% from 4.1% in April. Expectations had been for a decline to 0.1%. Meanwhile, eurozone consumer confidence improved slightly to -17.4 and economic sentiment deteriorated to 96.5 from 99.

GBP/USD is rising after data showed that UK shop inflation rose to 9% in May, its highest level in at least 18 years in May, despite food price growth cooling modestly. Food inflation eased to 15.4% from 15.7%, the all-time high reached in May. The BoE is expected to raise interest rates again in June to tame inflation which is still 4 times the BoE’s forecast.

EUR/USD -0.13% at 1.0730

GBP/USD +0.01% at 1.2365
 

Oil falls on debt ceiling jitters

Oil prices are falling as the debt ceiling agreement heads to Congress and amid mixed messages from OPEC+ member countries.

Should the deal be held up in Congress, there is still a possibility that the US could default on its debt, which would hurt the oil demand outlook.

Adding pressure to the oil pressure is the increasingly hawkish Fed outlook. Another rate hike from the Fed could slow growth further, hitting the demand outlook.

Investors are also looking to the OPEC+ meeting on June 4^th amid mixed messages from oil producers over whether the group could cut production further or not.

In April, the OPEC+ group announced further oil output cuts of around 1.2 million barrels per day.

WTI crude trades -1.64% at $72.54

Brent trades at -1.46% at $76.80
 

Looking ahead

15:00 US Consumer confidence

17:00 Fed Barkin speech

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