Stock futures rise as debt-ceiling relief leads to rally

The value of U.S. stock futures rose on Tuesday as relief a debt-ceiling deal was secured that now needs Congressional approval.

On Friday, the DJIA soared 329 points, or 1%, to 33093. The S&P 500 SPX surged 54 points, or 1.3%, to 4205, and the Nasdaq Composite COMP rose 278 points, or 2.19%, to 12976.

U.S. stocks were expected to begin the week-long holiday at fresh 10-month highs as traders welcomed a deal to extend the government debt-ceiling and as optimism over AI-derived earnings continued to underpin sentiment.

Volumes should return to normal today after the U.S. long weekend, so we should get a much better read on market trends where optimism over a U.S. debt ceiling agreement may continue to support risk assets for the early part of the week, said Stephen Innes, SPI's managing partner.

Some analysts were less cautious, noting Congress must still pass the deal and this uncertainty may keep a lid on ebullience.

While the initial reaction is probably to be positive, sentiment will be tempered by the fact that the deal is not yet over the line, with the next hurdle being Congress, where there has already been some rumbles of dissatisfaction. In any event, further developments will be eagerly awaited this week as the political saga continues to unfold, and until a definitive agreement is reached, markets are likely to resume something of a holding pattern, said Richard Hunter, head of markets at Interactive Investor.

equity bulls will be hoping the stock market will accelerate after finally managing to close above the 4,200 mark on Friday that had proved a stubborn top to a multi-month trading range.

Support could come from big tech stocks as investors look for more AI exposure and valuations are helped by retreating bond yields as debt ceiling angst eases, according to analysts.

Nasdaq 100 NDX, boosted by AI-chipmaker Nvidia NVDA, has surged 30.7% so far in 2023 and sits at a more than 12 month high.

W ith the positive bond correlation that has held for most of the past 18 months, we will be looking for NDX to continue its rally, Emanuel said.

SPI's Innes said that after the debt-ceiling relief rally, the focus could turn back on the many concerns that have kept most Wall Street analysts in a cautious mood.

The first boat rocker could be Friday's employment report for May which takes on immense importance as that will be the last major data point that Fed officials will have a chance to comment on before their June 14th rate decision, Innes said.

Virginia Fed President Thomas Barkin is scheduled to speak at 1 p.m. Eastern.