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S&P 500 Claws Back Losses on Easing Fears of U.S. Default

Stock MarketsOct 06, 2021 03:13PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 slashed its losses Wednesday, after Republicans said they would support extending the debt ceiling until December, easing fears about U.S. default and paving the way for bullish bets on stocks to resume.

The S&P 500 rose 0.10%, the Dow Jones Industrial Average climbed 0.1% or 30 points, the Nasdaq was up 0.2%.

Senate Minority Leader Mitch McConnell said he would support extending the debt limit extension into December to give the Democrats more time to raise the ceiling. The Treasury Department has indicated the debt ceiling would need to be raised by Oct. 18 for the U.S. to avoid running out of money.

"This will moot Democrats’ excuses about the time crunch they created and give the unified Democratic government more than enough time to pass standalone debt limit legislation through reconciliation," said McConnell in a statement.

As the clock ticked down on the Oct. 18 deadline, investors didn't appear eager to bet on a U.S. default as 5-year credit default swaps default risk pricing on the U.S. debt ceiling has only "edged up a smidge in the past 2-3 weeks and 4-week bill yields are little changed again this morning," Scotia Economics said.

Technology led the move, with megacap tech in the ascendency.

Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOGL) were in the green.

The upside in the broader market was stifled, however, by fall in energy, paced by a decline in oil prices after disappointing U.S. weekly petroleum data and reports the U.S. is considering releasing emergency oil supplies.

Crude inventories increased by 2.346 million barrels last week, compared with analysts' expectations for a draw of 418,000 barrels.

Elsewhere in the energy complex, natural gas reversed its gains after Russian President Vladimir Putin said Russia is ready to supply more natural gas to ease the ongoing energy crunch.

The backdrop of rising energy prices has stoked investor fears that elevated inflation will persist just as the strength of the recovery remains doubt, potentially leading to stagflation.

These fears are playing out in the bond market, where the catalyst driving Treasury yields has switched from rising real yields to a "lift in breakevens – indicative of rising stagflation worries due to the rent lift in energy prices," Daiwa Capital Markets said in a note.

Elsewhere in the energy complex, natural gas reversed its gains after Russian President Vladimir Putin said Russia is ready to supply more natural gas to ease the ongoing energy crunch.

The backdrop of rising energy prices has stoked investor fears that elevated inflation will persist just as the strength of the recovery remains doubt, potentially leading to stagflation.

These fears are playing out in the bond market, where the catalyst driving Treasury yields has switched from rising real yields to a "lift in breakevens – indicative of rising stagflation worries due to the rent lift in energy prices," Daiwa Capital Markets said in a note.

Breakeven inflation expectations on five-year Treasury Inflation-Protected Securities (TIPS) rose to 2.61%, the highest since late July, while the 10-year TIPS hit 2.45%, the highest since June.

Other cyclical sectors were also in the red including financials and industrials even as the data the economy created more private jobs last month.

ADP private payrolls climbed by 568,000 in September, beating economists estimates for a rise of 450,000, driven by hiring in service industries.

In other news, General Motors (NYSE:GM) unveiled a plan to double annual revenue and improved margins by the end of this decade.

Moderna (NASDAQ:MRNA) fell 6% after Sweden’s public health agency suspended use of the company’s COVID-19 vaccine for anyone born in and after 1991 because of increased risk of heart inflammation.

S&P 500 Claws Back Losses on Easing Fears of U.S. Default
 

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Comments (9)
Mike Wellons
Mike Wellons Oct 06, 2021 3:34PM ET
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Proof positive of GOP hypocrisy, as if we needed to see it again🤦‍♂️. McConnell wants debt ceiling raised, even supports raising it until December, then pretends he doesn't want raise it. Vote him out
Josh Davis
Josh Davis Oct 06, 2021 3:34PM ET
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I agree vote them all out. Cut govt to a smaller panel. Smaller government less problems.
NICHOLSON NICHOLAS
Blackpanda07 Oct 06, 2021 3:18PM ET
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we need trump back on united states president,,this biden is to much problem with global economics,,
Scott Alexander
Scott Alexander Oct 06, 2021 3:18PM ET
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Yes, we need to put more tariffs on China! That will really help.
Jeff Chevalier
Jeff Chevalier Oct 06, 2021 3:18PM ET
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You do realize that the tariffs are paid for by the purchaser right? If a US company buys from China, the US company pays more.
Toby Fiddler
Toby Fiddler Oct 06, 2021 3:03PM ET
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All you people on here always have to something to say about how the market is a "fraud", "ponzi scheme", "stock market is the biggest joke in the world". Its the same thing every single time when ever a news piece comes out. Obviously none of you people are making money. Especially that Mitchel Pioneer guy. The same thing every time. If I could bet money for every news piece that this guy will be in the comments section saying the same thing, I would be rich af.
Scott Alexander
Scott Alexander Oct 06, 2021 3:03PM ET
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My 401k management is up 15% this year! No complaints!
Matt Kay
Matt Kay Oct 06, 2021 3:03PM ET
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Scott Alexander That is actually poor performance considering SPY returned 33% this year alone.  Since printer is going BRRR it may go 50% by year end. If you think this is normal behavior you may be new to trading.
Ricardo Diogo
Rcd72 Oct 06, 2021 3:03PM ET
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you feel like the king of the world, it is good that you are making money! but the real world ? this year inflation is higher than growth! and it is a Ponzi scheme is it is fake market because us debt rose to 27T and average us workers will pay it and their children will still be paying it!
Jon Bal
Jon Bal Oct 06, 2021 2:59PM ET
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Biden says, "A failure to raise the debt limit will call into question Congress’s willingness to meet our obligations that we’ve already incurred — not new ones" isn't borrowing from peter to pay paul the very definition of a ponzi?
Mitchel Pioneer
Mitchel Pioneer Oct 06, 2021 2:36PM ET
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And notice how the "buying spree" magically stops as the "market" goes green.  The greatest financial fraud in the world.
Mitchel Pioneer
Mitchel Pioneer Oct 06, 2021 2:33PM ET
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"DOW claws back losses," the most prolific headline in internet news history.  ********points in losses miraculously vanish.  When's the last time a 400+ point "gain" vanished?  Fraudulent, criminally manipulated, pathetic joke,
Hussaini Bala
Hussaini Bala Oct 06, 2021 2:31PM ET
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Hussaini bala
Radium King
Radium King Oct 06, 2021 2:29PM ET
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Rate hike to 3%
William Bailey
William Bailey Oct 06, 2021 2:21PM ET
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Fed pumps in cash !
Josh Davis
Josh Davis Oct 06, 2021 2:21PM ET
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Save the markets amirite ?
Nkechi Christian
Nkechi Christian Oct 06, 2021 2:21PM ET
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I have a better offer
 
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