Dow futures rose 35 pts; debt ceiling negotiations, Powell speech in focus

May 19, 2023 7:17 AM EDT -- U.S. stocks are seen edging higher at the open Friday, as investors continue to monitor the debt ceiling negotiations as well as comments from Federal Reserve head Jerome Powell.

At 07:00 ET (11:00 GMT), the Dow Futures contract was up 35 points, or 0.1%, S&P 500 Futures traded 5 points, or 0.1%, higher, while Nasdaq 100 Futures traded largely unchanged.

The main indices posted gains on Thursday, with the broad-based S&P 500 and the tech-heavy Nasdaq Composite closing at their highest levels since August last year, gaining 0.9% and 1.5%, respectively. The blue chip Dow Jones Industrial Average underperformed, gaining just 0.3%.

This followed House Speaker Kevin McCarthy, one of the key Republican leaders in Congress, saying he was hopeful that congressional negotiators would sew up a deal for a vote next week.

An agreement to lift the country’s $31.4 trillion borrowing limit would remove the risk of the federal government defaulting on its debts, which would likely have a disastrous impact on the global economy.

The major averages are on course to post strong weekly gains, with the Nasdaq up 3.3% and the S&P on pace to end 1.8% higher, which would be their best weekly performances since March 31, while the DJIA is up 0.7%.

Optimism that a deal will soon arrive means investors are turning their attention back towards the future path of monetary policy as the Federal Reserve heads into its June meeting.

Most still expect the U.S. central bank to pause its aggressive rate-hiking cycle, but several Fed officials have taken a hawkish stance this week, suggesting that inflation remains too high to ease the monetary pressure now.

Fed Chair Jerome Powell is due to participate in a panel discussion with former Fed Chair Ben Bernanke at a conference in Washington, D.C. later in the session.

In the corporate sector, quarterly earnings are due from agricultural and construction equipment maker Deere&Company (NYSE: DE) and apparel and footwear retailer Foot Locker (NYSE: FL).

Additionally, Ross Stores (NASDAQ: ROST) stock fell premarket after the off-price retailer offered up disappointing second-quarter guidance even as it raised its annual profit forecast, buoyed by demand from budget-conscious customers.

Applied Materials (NASDAQ: AMAT) stock also retreated premarket despite the semiconductor reporting a third-quarter earnings beat.

Oil prices rose Friday as traders took advantage of the optimism surrounding the potential raising of the U.S. debt ceiling to buy back into heavily discounted markets.

The crude market is on course to add around 3% this week, the biggest weekly gain since early April, breaking a run of four straight weeks of losses.

However, the immediate outlook still remains gloomy with elevated inflation data pointing to more interest rate hikes from global central banks and as weak economic data from China, the world’s largest crude importer, continued to emerge.

By 07:00 ET, U.S. crude futures traded 1.2% higher at $72.69 a barrel, while the Brent contract climbed 1.2% to $76.76.

Additionally, gold futures rose 0.4% to $1,968.35/oz, while EUR/USD traded 0.2% higher at 1.0794.

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