Stocks jumped Friday as traders grew hopeful that lawmakers will reach a deal to raise the U.S. debt ceiling, avoiding a potentially catastrophic default.
The Dow Jones Industrial Average climbed 321 points, or 1%. The S&P 500 gained 1.3%, and the Nasdaq Composite advanced 2.2%.
Congressional and Biden administration negotiators were zeroing in on a deal that would increase the U.S. debt limit for two years. House Speaker Kevin McCarthy said talks Thursday night yielded progress, but added: “We’ve got to make more progress now.”
Treasury Secretary Janet Yellen has warned that the U.S. could default as soon as June 1 if the debt ceiling is not raised. Economists and Wall Street leaders have also raised concern over the possibly devastating impact of a U.S. debt default.
“Once a debt deal is done, markets will have to deal with the harsh reality that the Fed is going to kill this economy,” Ed Moya, senior market analyst at Oanda, wrote on Friday. “The end of tightening might not occur until the end of summer and that means we will probably get bigger rate cuts next year.”
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