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Why are stocks up today?

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Stocks are seeing a surprise rise today as investors regain confidence in the debt ceiling negotiations. Indeed, stock market indices like S&P500 And Nasdaq are up 1% and 1.7%, respectively, ahead of an anticipated debt cap deal. Why are stocks up today?

According to a Reuters this morning’s report, President Joe Biden and House Speaker Kevin McCarthy “reach a deal” to raise the debt ceiling for the next two years.

Goldman Sachs’ economic research team released a note to clients on Thursday predicting that a deal would be reached before the end of the weekend. That would give Congress until Wednesday to enact the legislation ahead of the default June 1 date.

“While it is difficult to predict when an announcement might take place, we believe the odds are highest that a deal will be announced late Friday (May 26) or Saturday (May 27). If so, that would likely allow for a vote in the House late Tuesday (May 30) or Wednesday (May 31). The Senate must also pass the deal, although there are unlikely to be any procedural hurdles preventing timely enactment.

The new debt ceiling reports are a promising change of pace. If you recall, just a week ago, negotiators for Biden and McCarthy halted meetings due to a lack of progress. The evidence that the country can once again dodge the risks of a default is clearly enough to entice investors to buy again.

Why are stocks up today?

Debt ceiling talks aren’t the only reason stocks are currently in the green.

In fact, today’s rise could be a continuation of yesterday’s. Nvidia (NASDAQ:NVDA)-powered rally. The chipmaker’s stock jumped more than 24%, matching the Nasdaq’s 1.7% jump on Thursday following the announcement of explosive results. In particular, the tech giant made investors’ hearts race after hinting at the revenue potential of the company’s AI sector, especially in data centers.

“We are seeing incredible orders to retool data centers around the world. And so I think you see the beginning of, call it, a 10-year transition to basically recycle or reclaim the data centers of the world and build them as accelerated computing…and the workload will be mostly generative AI,” said Jensen Huang, founder and CEO of Nvidia.

Gap (NYSE:GPS) is also one of today’s big winners, up more than 10% after recording its own upset victory on Thursday.

As of the date of publication, Shrey Dua does not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

With degrees in economics and journalism, Shrey Dua draws on his extensive background in media and reporting to write knowledgeable pieces covering everything from financial regulation and the electric vehicle industry to the housing market and the Monetary Policy. Shrey’s articles have appeared in Morning Brew, Real Clear Markets, Downline Podcast, and more.


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