House committee to review debt limit deal, HP to report - what's moving markets

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Investing.com -- A House committee is set to examine the debt ceiling deal, with investors hopeful that Congress will sign off on the agreement before a potential U.S. default on June 5. Meanwhile, HP Inc. prepares to report its latest earnings, while Cathie Wood sounds off on a recent surge in Nvidia shares.

1. House committee to take up debt ceiling deal

The newly-forged debt ceiling deal will face one of its first major tests in Congress later today when the House Rules Committee examines the bill.

Some hard-line conservatives on the committee have already spoken out against the accord, arguing that it does not include deep enough spending cuts.

But Republican House Speaker Kevin McCarthy, who held weeks of fraught negotiations with U.S. President Joe Biden over raising the $31.4 trillion debt ceiling, has said that he is still confident the committee will ultimately sign off on the agreement being brought to the House floor.

On the other side of the aisle, leftwing Democrats have railed against the concessions made by Biden to reach a deal over the borrowing limit with Congressional Republicans.

Even still, both Biden and McCarthy believe the bill will receive Congressional approval before June 5 - the day when the Treasury Department has warned that the federal government could run out of money.

2. U.S. futures edge higher

U.S. stock futures climbed in early trading on Tuesday, with investors optimistic that Congress will pass the debt limit bill even without the support of some lawmakers.

At 05:16 EST (09:16 GMT), the Dow futures contract gained 81 points or 0.24%, S&P 500 futures rose 24 points or 0.57%, and Nasdaq 100 futures rose 156 points or 1.09%.

The main indices were closed on Monday for the Memorial Day holiday.

Biden told reporters that he "feels good" about the prospects for the legislation. Reports say the House is expected to vote on it as soon as Wednesday, with the Senate later set to take up the issue this weekend.

The 99-page agreement would raise the debt ceiling for two years, effectively pushing the normally fraught negotiations beyond the 2024 presidential election, and cap some government expenditures.

3. Oil reverses course

Oil prices dropped on Tuesday, erasing earlier gains, as the upbeat outlook for the debt limit deal was offset by looming concerns over rising interest rates and slowing economic growth.

At 05:16 ET, West Texas Intermediate Crude futures fell 2.13% to $71.12 a barrel, while Brent oil futures slipped by 2.19% to $75.41 per barrel. Both had initially climbed by as much as 0.9%.

Crude markets settled higher in muted trading on Monday as the agreement in Washington helped ease some fears that the U.S. was hurtling toward a potentially catastrophic default.

But these increases were tempered by worries over a more hawkish Federal Reserve after hotter-than-expected April inflation data. Analysts cited by Reuters say a spike in borrowing costs, as well as a stronger dollar, could weigh on demand in the U.S., the world's biggest oil consumer.

4. HP to report

HP Inc (NYSE:HPQ) will unveil its second-quarter earnings after the close of U.S. trading today, with investors keen to see how much a post-pandemic slide in PC demand has hit the personal computer and printer maker.

The Palo Alto-based group is expected to report a 29% decline in adjusted earnings per share to $0.76 for the three months ended on April 2023, according to Bloomberg consensus estimates. Revenue is also seen dipping about a fifth to a little over $13 billion.

Consumers have scaled back spending on big-ticket items like PC due to inflationary pressures and economic uncertainty. Worldwide PC shipments totaled 55.2 million in the first quarter of 2023, representing a year-on-year decrease of 30%, preliminary results from a Gartner study released last month showed.

Earlier this year, HP predicted that sales from its personal systems division, which includes both computers and notebooks, will drop by "a high single-digit sequentially" in the second quarter. However, revenue at the unit is expected to improve in the back half of the year as elevated inventory levels normalize.

5. Cathie Wood on Nvidia

Nvidia (NASDAQ:NVDA) stock has surged since the chipmaker reported an artificial intelligence-fueled earnings beat last week, but Cathie Wood remains skeptical.

In a series of tweets, the manager of the ARK Innovation exchange-traded fund (NYSE:ARKK) balked at Nvidia's target of a 25-fold jump in sales for 2023.

Wood added that other big-name players also stand to benefit from the spike in AI interest. She specifically pointed to Tesla (NASDAQ:TSLA), saying that the new technology will help the electric carmaker develop its autonomous driving capabilities.

The comments come after Wood closed out her investment in Nvidia in the ARKK fund earlier this year, Bloomberg News reported. That move was prior to the sharp rise in Nvidia shares that has brought the company near to a trillion dollar valuation.