US stocks hit a nine-month high on Thursday as lawmakers in Washington boosted traders’ hopes that the debt ceiling will pass through the Senate by the end of the week and fresh economic data dampened concerns about a recession.
The S&P 500 Index on Wall Street added 1 percent. The heavy Nasdaq Composite Index rose 1.3 percent, recouping losses from the previous session. Both indexes closed at their highest levels since August 2022.
The House of Representatives late Wednesday passed a bill to raise the debt ceiling — a crucial step in averting a historic default. It will be sent to the Senate, which is the last stage before it can be signed into law.
Chuck Schumer, the Senate Democratic leader, said the upper chamber of Congress will remain in session until the debt ceiling bill is approved, which would raise the US borrowing limit and set spending caps for the next two years.
“We still have to get through the Senate, but I’m more inclined to think that’s a rubber stamp at this point,” said Stephen Innes, managing partner at SPI Asset Management. “The market here is very well positioned in favor of that happening.”
Meanwhile, data from the US Department of Labor showed that the number of new applications for unemployment assistance rose to 232,000, but remained at historically low levels despite the slowing economy. The data comes ahead of Friday’s official jobs report.
“The data is coming through a lot more resilient than the market expected,” said Rob Haworth, chief investment analyst at US Bank Wealth Management. “The labor market is still strong, and consumer spending is slowing, but it’s still stronger than people would have expected if we were heading straight into a recession.”
Two senior Federal Reserve officials on Wednesday indicated their support for the central bank to refrain from raising the record interest rate at its meeting in June.
After dovish comments from Federal Reserve Governor Philip Jefferson and Philadelphia Fed President Patrick Harker, the implied probability of a rate hike at the next meeting has fallen to around 30 percent.
Meanwhile, shares of retailer Dollar General fell 19.5 percent after it cut its sales forecasts, as persistent inflation weighed on lower-income consumers.
In Europe, the region-wide Stoxx 600 index closed up 0.8 percent, while the German DAX index rose 1.2 percent, and the French CAC 40 rose 0.6 percent.
Traders’ confidence increased after official data showed that eurozone-wide inflation slowed more than expected, falling to 6.1 percent in May, the lowest level since Russia’s all-out invasion of Ukraine. The consensus forecast of economists compiled by Reuters predicted inflation would fall to 6.3 percent.
Core inflation, which excludes energy and food prices, fell from 5.6 percent in April to 5.3 percent in May.
The numbers gave more confidence that the European Central Bank will agree to an increase of just a quarter point when it meets on June 15, and could mark a peak in interest rates in the eurozone.
“A September hike is becoming more and more unlikely, and even a July hike is starting to be called into question,” said Kamil Kovar, chief economist at Moody’s Analytics.
In Asia, China’s CSI 300 index of shares listed in Shanghai and Shenzhen advanced 0.2 percent on the back of an unexpected rebound in a crucial gauge of Chinese factory activity.
The Caixin/S&P Global manufacturing PMI rose to 50.9 in May, in contrast to the official manufacturing PMI released earlier this week, which fell to 48.8. A reading above 50 indicates expansion compared to the previous month.
However, the gains in Hong Kong evaporated and the benchmark Hang Seng index closed down 0.1 percent, having fallen about 20 percent since its January peak, near its lowest since November 2022.