U.S. stock futures were tentatively higher on Tuesday morning, kicking off a shortened trading week on hopes that the hard-won agreement on the cap would pass through a divided Congress within days.
Contracts on the S&P 500 (^GSPC) rose 0.62%, while those on the technology-heavy Nasdaq Composite (^IXIC) rose 1.39%. But those of the Dow Jones Industrial Average (^DJI) fell 0.02%.
US bond yields lost ground as investors weighed the potential impact of the debt limitation agreement. The yield on the benchmark 10-year Treasury fell to 3.72%. The yield on two-year bonds slipped to 4.51%, while that on 30-year bonds fell to 3.89%.
Investors are now waiting for the debt ceiling agreement to pass its next crucial hurdle so it can pass lawmakers and avoid a damaging default.
President Joe Biden and House Speaker Kevin McCarthy reached an agreement in principle on Sunday to raise the debt ceiling and on the budget. The deal came after weeks of negotiations, slow progress that rattled markets.
Still, the deal faces an early test Tuesday in the House Rules Committee, which is due to review the bill before a scheduled vote in the House on Wednesday, and before it goes to the Senate.
The administration has warned that Congress must raise the debt ceiling by June 5 – the so-called “Day X” – or risk tipping the United States into the first default in its history.
Even as the clock ticks, Wall Street is playing the waiting game.
“There isn’t much room for error, but with moderates on both sides seemingly in line, then there may be a vocal minority on both sides against the deal and it goes through anyway,” wrote Jim Reid and his Deutsche Bank colleagues to customers on Tuesday morning. “We’ll see how lawmakers react when they return from the holiday weekend.”
Meanwhile, the main economic release of the week will be the US jobs report for May, due out on Friday. Economists polled by Bloomberg expect monthly payroll additions to fall to 180,000 from 253,000 in April. The unemployment rate is expected to rise slightly to 3.5%.
The jobs report will be scrutinized in the coming weeks to see if the Federal Reserve will raise interest rates at the next meeting of policymakers, scheduled for June 13-14. Markets are pricing in a 25 basis point rate hike by July, after data last week showed US consumer inflation accelerated in April.
Elsewhere, shares of NVIDIA Corporation (NVDA) rose more than 3% on Tuesday morning after CEO Jensen Huang unveiled a host of new AI-related products and services the day before.
Other Ai-related stocks rose, including shares of Palantir Technologies Inc. (PLTR), which gained more than 4% in premarket trading. Shares of Advanced Micro Devices, Inc. (AMD) climbed more than 2%, while shares of C3.ai Inc. (AI) gained more than 5%.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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