(Bloomberg) — The frenzy surrounding artificial intelligence led to another day of gains in the stock market on Friday as traders were also growing more confident a deal on the US debt limit would be reached.
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The S&P 500 rose 1.3% and the tech-heavy Nasdaq 100 added 2.6% as Marvell Technology Inc. said 2024 revenues would “at least double” from a year ago on a surge in demand from AI, echoing sentiments from rival chipmaker Nvidia Corp. earlier in the week.
The gains came as US negotiators also appeared to be moving closer to an agreement to raise the US debt limit and cap federal spending for two years. A US default could result in catastrophic damage, putting markets on edge. However, House Speaker Kevin McCarthy said he believed progress had been made last night.
“Today we are getting a boost from debt ceiling headlines plus continued AI enthusiasm,” said John Kolovos, chief technical strategist at Macro Risk Advisors.
Investors were demanding less of a premium to hold US Treasury bills seen most at risk of nonpayment if a deal isn’t reached in time. Securities expiring in early June — when Treasury Secretary Janet Yellen warned the government could run out of money — were all yielding less than 6% on Friday.
Meanwhile, the rate-sensitive two-year Treasury drifted as traders considered how a debt deal could play into the Federal Reserve’s path forward on interest rates. The two-year yield hovered around 4.56% after a report on consumer spending showed the Fed still has more work to do to bring inflation back toward its target. The personal consumption expenditures price index, one of the Fed’s preferred inflation gauges, rose by a faster-than-expected 0.4% in April.
“While we believe that there are good chances for a [debt] resolution before the FOMC meeting, any deal would almost certainly include some fiscal tightening, which should reduce the need for the Fed to hike rates,” said Brian Rose, senior US economist at UBS Chief Investment Office. “Going past the debt ceiling deadline would have serious consequences, and in that event there is almost no chance that the Fed will hike.”
Read more: US on ‘Borrowed Time’ as Debt Cap Drives Cash Below $50 Billion
In other corporate news, retailer Gap Inc. rallied 12% after reporting better-than-expected results. Workday Inc. jumped 10% after results at the application software company pointed to stable demand. And Ford Motor Co. rose 6.2% after striking a deal with Tesla Inc. to give its electric vehicle customers access to the Tesla Supercharger network.
Elsewhere in Europe, the Stoxx 600 rose with chipmakers including ASML Holding NV advancing for a second day. Glencore Plc gained after a report that its Viterra unit is in talks to merge with Bunge Ltd., one of the world’s largest crop merchants. And in Asia, the benchmark CSI 300 index ended little changed, bringing the week’s losses to 2.4% amid growth concerns.
The S&P 500 rose 1.3% as of 4:03 pm New York time
The Nasdaq 100 rose 2.6%
The Dow Jones Industrial Average rose 1%
The MSCI World index rose 0.2%
The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.0729
The British pound rose 0.3% to $1.2352
The Japanese yen fell 0.4% to 140.57 per dollar
Bitcoin rose 1.1% to $26,774.72
Ether rose 1.4% to $1,834.97
The yield on 10-year Treasuries declined two basis points to 3.80%
Germany’s 10-year yield advanced two basis points to 2.54%
Britain’s 10-year yield declined four basis points to 4.33%
West Texas Intermediate crude rose 1.3% to $72.77 a barrel
Gold futures rose 0.2% to $1,965.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Peyton Forte.
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