US stocks advanced on Tuesday, bolstered by a strong technology sector and hopes that lawmakers would pass the debt-ceiling bill ahead of the looming June deadline.
The tech-heavy Nasdaq Composite added 0.7 per cent, led higher by gains in the computer index stocks. Wall Street’s benchmark S&P 500 rose 0.1 per cent, having closed at a nine-month high on Friday.
The moves come as AI-related stocks extended their rally from the previous week, with Nvidia breaching $1tn in market capitalisation and its shares rising 6 per cent on Tuesday.
Nvidia became the first chipmaker to join the trillion-dollar club — alongside the ranks of Amazon, Apple and Alphabet — having benefited from the soaring demand for chips used in generative artificial intelligence systems.
The Philadelphia Semiconductor index has added more than 40 per cent since the start of the year, driven by the booming AI industry.
Meanwhile, the pressure on US Treasuries eased as traders predicted the US debt-ceiling bill, agreed on Saturday, would pass through Congress in the course of this week, ahead of the default deadline.
The yield on policy-sensitive two-year bills fell 0.09 percentage points to 4.5 per cent. The yield on the benchmark 10-year note was down 0.11 percentage points to 3.71 per cent. Bond yields fall as prices rise.
The yield on Treasury bills that mature next month — at about the date the government could run out of money — eased slightly to 5.27 per cent, having last week hit its highest level in more than 20 years.
Garrett Melson, Portfolio Strategist at Natixis Investment Managers, said: “Nothing is certain until [the bill] is on the president’s desk and signed, but at the end of the day it certainly points to the fact that a lot of those worst-case scenarios aren’t going to come to fruition here.”
The deal would raise the country’s $31.4tn debt ceiling for two years until after the next presidential election in late 2024. The bipartisan bill needs to pass both chambers of Congress, with traders poised for the first vote in the House of Representatives on Wednesday.
Meanwhile, the latest report from the Conference Board showed US consumer confidence declined in May as perceptions of the labour market and future business conditions deteriorated amid persistent inflation and concerns about a potential recession.
In Europe, the region-wide Stoxx 600 was down 0.9 per cent, the CAC 40 lost 1.3 per cent and the FTSE 100 dropped 1.4 per cent.
In foreign exchange markets, the Turkish lira weakened to TL20.4 against the US dollar, hitting a record low after President Recep Tayyip Erdoğan secured victory in the country’s election over the weekend.
The Hang Seng China Enterprises index was down during Asian trading on Tuesday, pushing it 20 per cent lower from its peak in January. That temporarily placed it in bear market territory, although it later rallied to close up 0.5 per cent.
China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks was also down more than 10 per cent from its peak this year, matching the technical definition of a market correction, although it also later rallied to close marginally up.
Pressure on Chinese stocks follows mounting worries over the outlook for the world’s second-largest economy as tensions rise between Washington and Beijing.
The relentless sell-off reflects a growing consensus among investors that the country’s economic recovery is losing steam, about half a year after Beijing abandoned President Xi Jinping’s disruptive zero-Covid 19 policy.
Winnie Wu, China equity strategist at Bank of America, said clients had described many Chinese stocks as “too cheap to short but not good enough to go long”.
Wu said that while valuations for China shares had become attractive, the recovery remained weaker than anticipated and the economy was likely to continue underperforming without more substantial state support.
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