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A deal, maybe, but what about stocks?



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Nasdaq up more than S&P 500, Dow slips slightly

In S&P sectors, real estate leads gainers, energy falls most

STOXX Europe 600 index down 0.4%

Dollar dips, crude oil off >3%; gold, bitcoin higher

U.S. 10-Year Treasury yield at ~3.74%

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A DEAL, MAYBE, BUT WHAT ABOUT STOCKS? (1022 EDT/1422 GMT)

While a bipartisan deal to raise the $31.4 trillion U.S. debt ceiling awaits its first test in Congress on Tuesday, Sam Stovall, chief investment strategist at CFRA Research is looking into what might happen to stocks next.

Now Stovall points out that "the extreme fringes of both parties" need to vote to support agreement. Ultimately he believes it will be approved before the revised "drop dead" date of June 5 when the United States would run out of money to pay its bills.

But even as Stovall wonders which stocks will benefit from the lifting of the dark cloud that has caused much anxious discussion among investors in recent weeks and months, hesays it's not a given the market will have rally from here.

To be sure, the strategist notes that "in reaction to the aroma of an agreement, the S&P 1500 jumped 1.3% on Friday," with upside in all sizes and styles, 8 out of 11 sectors and growth-oriented communication services, consumer discretionary, and information technology groups leading the way.

But, "the broad-based single-day price advance did not undo the damage done earlier in the week" with 27% of sub-industries ending the week above 10-week and 40-week moving averages versus 41% for the week ended May 19, said Stovall.

"This dwindling participation rate might be signaling that tough times lay ahead," according to the strategist even as he points to an S&P 500, which is ~2% away from a 20% recovery from it Oct. 12, 2022, low, which would indicate the start of a new bull market.

It could be due to the higher-than-expected readings for consumer spending, durable orders, Q1 GDP, and personal consumption expenditures (PCE) last week as stickier inflation may point to a Federal Reserve that's not done with rate hikes.

So "while there might be “no swoon in June”, the odds don’t favor a solid performance, either," says Stovall.

(Sinéad Carew)

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U.S. STOCK INDEX FUTURES GAIN ON TENTATIVE DEBT LIMIT DEAL (0905 EDT/1305 GMT)

U.S. stock index futures were higher early on Tuesday after President Joe Biden and Republican House Speaker Kevin McCarthy on Sunday signed off on an agreement to temporarily suspend the debt ceiling.

Nasdaq futures led the gains, with the market extending last week's late rally tied in part to a rally in chip stocks and a strong forecast from Nvidia NVDA.O

A House committee is set to meet later Tuesday to discuss the deal, which also includes capping some federal spending. Congress has days to approve a package to avoid a U.S. default.

S&P 500 e-minis EScv1 were up about 0.6% while Nasdaq 100 e-minis NQcv1 were up more than 1%, extending last week's strong gains.

Here is the premarket snapshot:

(Caroline Valetkevitch)

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Futures early trading https://tmsnrt.rs/3MJrFTl

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