Stock futures advanced Thursday morning, with investors cheering developments in Washington as lawmakers neared an agreement that would temporarily avert a government default by mid-month.
During the regular trading day, the three major equity averages had shaken off earlier losses after Senate Minority Leader Mitch McConnell offered Democratic lawmakers a deal to temporarily extend the government borrowing limit into December. Such a move would offer time to prevent a government default that many pundits said could come as soon as around Oct. 18.
The issue of the debt ceiling has been a focal point for corporate leaders and market participants alike. Earlier Wednesday, President Joe Biden met with top business leaders including JPMorgan CEO Jamie Dimon and Nasdaq CEO Adena Friedman, who urged lawmakers to raise the debt limit and prevent a government default they warned would be catastrophic to the U.S. economy. Treasury Secretary Janet Yellen also told CNBC she expected a government default would cause a recession.
“The debt ceiling is one of many factors right now that we think are causing these gyrations in the markets. Certainly the market will take some comfort when there is a deal, when it is more formalized,” Yung-Yu Ma, chief investment strategist for BMO Wealth Management, told Yahoo Finance.
The ongoing debt ceiling debate has been just one of a number of concerns to the market in recent weeks, which have all come together to catalyze volatility across risk assets.
In addition to concerns over the debt limit, “markets are looking for some resolution, or at least an end in sight to the supply chain issues, the inflation pressures that are building,” Ma added. “The markets are also starting to look toward the November meeting of the Fed, and hoping that the Fed is not going to show excessive increases in future interest rates as well … So several things are going on.”
A spike in energy and commodity prices has also weighed on investor optimism, reinforcing the persistent trend in rising price pressures across the global economy.
U.S. crude oil futures, however, pulled back for a second straight session Thursday morning, adding to losses following a Financial Times report that U.S. Energy Secretary Jennifer Granholm had not ruled out releasing crude oil from the government strategic petroleum reserve or banning crude exports to try and bring prices in check. West Texas intermediate crude oil had reached its highest price since 2014 just earlier this week.
“The surge in energy prices is just going to make all the supply chain issues that we’ve been experienced over the past year even worse. I suspect that the supply chain issues are going to get worse before they get better,” Troy Vincent, senior market analyst at DTN, told Yahoo Finance Live.
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Read More: Stock futures advance as debt ceiling deadline fears abate