[New York Stock Market] Mixed Trends Despite Debt Ceiling Agreement... Nvidia's Intraday Market Cap Hits $1 Trillion

The three major indices of the U.S. New York stock market closed mixed on the 30th (local time) amid mixed feelings of relief over the resolution of the debt ceiling negotiations and caution surrounding the remaining congressional approval process. Riding the wave of the artificial intelligence (AI) boom, Nvidia, which had previously released strong earnings guidance, briefly surpassed a market capitalization of $1 trillion during the session. However, it closed below $1 trillion based on the closing price.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 50.56 points (0.15%) from the previous session to close at 33,042.78. The large-cap focused S&P 500 index rose 0.07 points (0.0%) to 4,205.52, and the tech-heavy Nasdaq index gained 41.74 points (0.32%) to close at 13,017.43.

Within the S&P 500, technology, real estate, and discretionary consumer stocks showed gains, while energy, staples, and healthcare stocks declined. Due to the recent surge in demand for AI semiconductors, Nvidia closed at $401.11 per share, up 2.99% from the previous session. During the day, Nvidia’s stock price soared over 7%, reaching around $419. Nvidia’s market cap surpassed $1 trillion in the morning session but later trimmed gains, closing at approximately $990.7 billion. Currently, only a few companies have a market cap exceeding $1 trillion, including Apple, Google Alphabet, and Microsoft.

Meanwhile, electric vehicle company Tesla rose more than 4% following news that CEO Elon Musk visited China and met with Qin Gang, China’s State Councilor and Foreign Minister. ChargePoint Holdings surged over 14% after Bank of America (BoA) upgraded its investment rating. Coinbase also rose more than 7% following an upgrade from Atlantic Equities.

[Image source=Reuters Yonhap News]

On the first trading day of the week after the Memorial Day holiday, investors focused on Nvidia’s stock price rise and the debt ceiling issue. Following the weekend agreement between U.S. President Joe Biden and House Speaker Kevin McCarthy to raise the debt ceiling, attention is on the ongoing congressional procedures this week. Speaker McCarthy announced plans for a full House vote on the 31st, and from 3 p.m. that day, the House Rules Committee, known as the “gatekeeper,” began discussing the bill. Notably, two hardline Republicans on the committee have publicly opposed the bill, marking what is seen as the first real test.

Economic media CNBC reported that at least 20 conservative Republicans expressed opposition, accusing Speaker McCarthy of “bowing to the White House.” Dan Bishop, a Republican congressman and member of the hardline Freedom Caucus, said, “Speaker McCarthy should withdraw the bad bill,” hinting at a possible vote of no confidence. Representative Pramila Jayapal also criticized, telling reporters, “The Republicans did not get any significant concessions on spending. The agreement does not include meaningful debt reduction.” The previously released agreement essentially delays the debt ceiling until January 1, 2025, in exchange for some government spending cuts.

Despite such opposition, the current bipartisan leadership is confident in passing the bill and continues persuasion efforts. Goldman Sachs economists noted in an investor memo, “The upcoming congressional vote still carries some risk, but the main risk was political pressure preventing an agreement. Since an agreement has been reached, the likelihood of passage through both chambers is very high.” Bharat Ramamurti, Deputy Director of the National Economic Council (NEC), told CNBC, “If there is dissatisfaction on both sides, it generally signals a good compromise,” adding, “The macroeconomic impact will be quite minimal.”

With the U.S. Treasury newly setting June 5 as the X-day when cash runs out, the federal government’s cash holdings were estimated at $38.8 billion as of the 25th. This week also sees a large number of short-term Treasury auctions and redemptions, drawing investor attention. Major investment banks, including JP Morgan, expect that ongoing U.S. Treasury issuance under this agreement could lead to significant capital outflows from the stock market. UBS anticipates this will expand monetary tightening capacity and lead to a stronger dollar and rising Treasury yields.

The economic indicators released on the day showed mixed results. According to S&P CoreLogic Case-Shiller, the March home price index rose 0.4% from the previous month, marking two consecutive months of increases after seven months of declines. The home price indices for 10 major cities and 20 major cities also rose 0.6% and 0.5%, respectively, from the previous month. Craig Lazzara, Managing Director at S&P Dow Jones, commented, “This suggests the downward trend in home prices may have ended.”

On the same day, the Conference Board reported the May Consumer Confidence Index at 102.3, below the revised April figure of 103.7 but higher than the Dow Jones consensus forecast. The May expectations index also fell slightly to 71.5 from the previous month. The Conference Board explained, “Consumer outlook on the current situation is not optimistic, and expectations have worsened, leading to a decline in consumer confidence in May,” adding, “The current employment evaluation component showed particularly severe deterioration.”

This week will also see the release of key employment indicators closely watched by the Federal Reserve (Fed), including the April Job Openings and Labor Turnover Survey (JOLTs), ADP Employment Report, and May Nonfarm Payrolls, as well as the Beige Book assessing economic activity. Since the Fed has cited inflation and labor market overheating as reasons for further tightening, stronger-than-expected employment data could increase expectations for additional Fed tightening. Richmond Fed President Thomas Barkin attended an event on the day and warned about inflation, maintaining his stance on interest rate outlooks.

Last Friday’s release of the Personal Consumption Expenditures (PCE) price index showed a larger-than-expected increase, fueling expectations for a Fed rate hike in June. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of the afternoon, federal funds futures priced in over a 60% chance of a 0.25 percentage point rate hike in June, a sharp rise from about 28% a week ago. Conversely, the probability of a rate hold dropped from over 71% to 39%.

With the Fed’s blackout period starting June 3, during which officials are barred from public comments, attention will focus on speeches by officials such as Philadelphia Fed President Patrick Harker and Fed Governor Michelle Bowman during the week to gauge the tone.

In the New York bond market, Treasury yields fell. The 10-year U.S. Treasury yield stood around 3.69%, while the 2-year yield, sensitive to monetary policy, was about 4.46%. The dollar index, which measures the dollar’s value against six major currencies, remained steady around 104.1.

International oil prices plunged ahead of the OPEC Plus producers’ meeting scheduled for July 4. On the New York Mercantile Exchange, July delivery West Texas Intermediate (WTI) crude closed at $69.46 per barrel, down $3.21 (4.42%) from the previous session. This is the first time WTI has fallen below $70 since April.