US stocks rose Thursday as lawmakers in Washington raised hopes from traders that the debt ceiling will pass the Senate by the end of the week.
The Wall Street benchmark S&P 500 added 1 percent and the tech-heavy Nasdaq Composite gained 1.2 percent, reversing losses from the previous session.
The moves came as investors waited for the Senate to vote on the bill to raise the US debt ceiling from $31.4 trillion over two years — the final stage before it can be signed into law, preventing a historic government default. .
Senate Democratic leader Chuck Schumer said the Senate would remain in session until the debt ceiling bill was passed, which would increase the US borrowing limit and limit spending for the next two years.
“We still have to go 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 is very positioned here for this to continue. Stocks would be percentage points lower if investors suspected there was any indication that this would not happen.
Meanwhile, data from the U.S. Labor Department showed that new claims for unemployment assistance rose to 232,000, but remained at historic lows despite the economy cooling down.
The figure beat analysts’ expectations for 235,000 claims, raising hopes that the Federal Reserve’s tightening campaign will culminate in a “soft landing” as inflation eases without a serious recession.
Two top Fed officials on Wednesday expressed their support for the central bank to refrain from raising policy rates at its June policy meeting.
After mild remarks from Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker, the implied probability of a rate hike at the next meeting fell to about 30 percent, but investors still counted on a chance of a hike at the July meeting .
At the same time, shares of software company C3.ai fell 14.2 percent after its quarterly revenue forecast missed estimates, undermining Wall Street’s recent rally around AI-related stocks.
The European regional Stoxx 600 closed 0.8 percent higher, while the German Dax gained 1.2 percent and the French Cac 40 0.6 percent.
Traders gained confidence after official data showed inflation across the eurozone slowed more than expected, reaching 6.1 percent in May, the lowest level since Russia’s full-scale invasion of Ukraine more than a year ago. A consensus of economists’ forecasts compiled by Reuters expected inflation to 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 traders more confidence that the European Central Bank would agree to an increase of just a quarter point at its meeting on June 15, and that this could represent the spike in interest rates in the euro zone.
“A September rate hike has become increasingly unlikely, and even a July hike is beginning to be questioned,” said Kamil Kovar, senior economist at Moody’s Analytics.
In Asia, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks rose 0.2 percent on an unexpected rebound in a critical measure of Chinese manufacturing activity.
The Caixin/S&P Global manufacturing purchasing managers index 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 an increase compared to the previous month.
However, gains evaporated in Hong Kong and the Hang Seng stock index ended 0.1 percent lower, after falling nearly 20 percent since its peak in January, near its lowest level since November 2022.
