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A trader walks out of the New York Stock Exchange (NYSE) on Wall Street in New York City on May 12, 2023.
Angela Weiss | Afp | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
The rally in markets Thursday was driven by bad things that did not happen — or at least appear less likely to happen — rather than good things that did.
What you need to know today
- The latest on the U.S. debt ceiling: House Speaker Kevin McCarthy said the House could vote on the matter as early as next week. Some Democrats, however, are worried President Joe Biden is giving in to Republican demands, such as stricter work requirements for federal assistance programs.
- Major U.S. stock indexes rose Thursday, their second straight day of advances. European markets closed higher as well. The U.K.’s FTSE 100 added 0.25% even though British telecoms giant BT fell 5% after it reported disappointing earnings and huge job cuts.
- The U.S. Supreme Court left in place the legal shield that protects tech platforms from being held responsible for their users’ posts. It’s a big relief for tech companies like Meta, Twitter and Alphabet, but the status of the law remains precarious: U.S. lawmakers want to reform it, thinking it protects big tech firms too much.
- Alibaba’s first-quarter revenue rose 2% year on year to 208.2 billion Chinese yuan ($29.6 billion), though that figure missed analysts’ expectations. The Chinese tech giant also announced plans to spin off its cloud division as a separate, publicly traded company. Investors weren’t pleased with what they heard: U.S.-listed shares of the company fell 5.4%.
- PRO Gold prices may have dipped in May, but UBS Global Wealth Management thinks the metal could hit a record high of $2,100 per ounce. There are three reasons UBS is so bullish on gold.
The bottom line
Markets had a second consecutive positive day, trying to put the last two weeks’ losses behind them. The S&P 500 increased nearly 1%, The Dow Jones Industrial Average added 0.34% and the Nasdaq Composite climbed 1.5%.
With those numbers, the S&P and Nasdaq are at their highest levels since August 2022.
The rally in markets Thursday was driven by bad things that did not happen — or at least appear less likely to happen — rather than good things that did. It’s a reminder to investors that markets are often moved more by expectations than actual events.
First, the possibility of the U.S. defaulting on its debt is the lowest since discussions started in Washington. House Speaker McCarthy’s positive comments Thursday boosted optimism that the U.S. will reach a deal on the ceiling before June 1, when the country might become unable to pay its debts.
Next, the Supreme Court decided not to remove the legal shield that protects tech companies from being prosecuted over their users’ posts. Firms most affected by the ruling rose in relief: Alphabet, which owns YouTube, added 1.65%, and Meta, the parent company of Facebook, rose 1.8% to a 52-week high (though the stock also got juiced by Meta’s new artificial intelligence chips).
Yesterday was also a busy day for Federal Reserve speakers.
Dallas Federal Reserve President Lorie Logan, a voting member of the Federal Open Market Committee, thinks economic data don’t support a pause in rate hikes. “It’s a long way from here to 2% inflation,” Logan said, noting that an 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 as “insurance” against inflation.
Treasury yields inched higher in response to those comments, but investors’ relief around the debt ceiling was so strong that stock indexes weren’t affected much by interest rates. As always, avoiding defeat can be more powerful than outright victory.
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