Despite Inflation, U.S. Equities Hit 5-month high

Investors continued to watch developments in Washington following positive signals that policymakers are inching towards a deal on raising the debt ceiling before a June deadline.

Markets appear to have taken this news in good faith, as indexes hit their highest levels in recent months buoyed by Nvidia’s momentous run towards a trillion-dollar capitalization.

However, inflation remains elevated raising the possibility of another rate hike in June.

Here is a rundown of the news that made headlines this week in US markets

U.S equities hit a 9-month high

US stocks hit a nine-month high on Friday, propelled by solid economic data and growing investor optimism that a deal on the US debt ceiling will land in the coming days. In a relatively broad rally, investors scooped up stocks more sensitive to economic growth prospects and dumped traditionally defensive sectors such as utilities, healthcare and consumer staples.

The S&P 500 closed 0.3% higher for the week, finishing at its highest level since mid-August 2022. Tech-heavy Nasdaq boosted by the rally around AI-related stocks advanced 2.5% for the week.

Markets now expecting Fed rate hike in June

Markets raised their bets for a June rate hike from the Federal Reserve following hotter-than-expected inflation data. Inflation report released Friday showed that personal consumption expenditure prices rose 0.4% in April and 4.7% from a year ago.

According to CME Group, the latest inflation report has raised the odds for a quarter percentage point increase jumped to 56%. The chances of an increase were just 17% a week ago. The probability of a hike by no later than July rose to 75%.

Treasury updates ‘X date’, says it has enough reserves until June 5.

Treasury Secretary Janet Yellen said that the United States will likely have enough reserves to push off a potential debt default until June 5, potentially giving more time for negotiations for debt ceiling to reach an amicable solution and avoid an impending default.

The US Treasury Secretary had earlier informed Congress on May 1 that the United States had enough cash on hand to cover its obligations through “early June, and potentially as early as June 1,” the so-called “X date” was last updated.

US debt ceiling talks progress, as hopes of a possible deal mount.

President Joe Biden and Republican House Speaker Kevin McCarthy have made progress towards a two-year agreement to control government spending and prevent a US debt default, giving rise to optimism that the world’s largest economy’s fiscal impasse will soon come to an end.

Before the supposed June 1st deadline, negotiators are looking to finalise a deal which would prevent the US from defaulting on its debts.

Though nothing had been resolved, the White House and Republicans on Capitol Hill both claimed on Thursday that the negotiations were progressing better.

Nvidia shares pop 24%, approaches $1trn market capitalization

Nvidia (NVDA:NASDAQ) shares closed up 24% as it approaches a $1 trillion market cap. Nvidia’s data center group reported $4.28 billion in sales, versus expectations of $3.9 billion, a 14% annual increase

Nvidia said it expected sales of about $11 billion, plus or minus 2%, in the current quarter, more than 50% higher than Wall Street estimates of $7.15 billion. That forecast blew away Wall Street and turned the AI hype driving the stock into real results.

By its stock performance on Thursday, Nvidia would become the fifth publicly traded U.S. company to be currently worth $1 trillion. Apple created the club in 2018. Microsoft, Alphabet, and Amazon also now hold the distinction.

Ford and Tesla partner on EV chargers

Ford Motors (F:NYSE) will partner with Tesla (TSLA:NASDAQ) on charging initiatives for its current and future electric vehicles in an unusual tie-up between the two rivals. Under the agreement, current Ford owners will be granted access to more than 12,000 Tesla Superchargers across the U.S. and Canada, starting early next year, via the use of an adapter.

Ford’s next-generation of EVs — expected by mid-decade — will include Tesla’s charging plug, allowing owners of Ford vehicles to charge at Tesla Superchargers without an adapter, making Ford among the first automakers to explicitly tie into the network.