Nasdaq boosted by Nvidia, cautious optimism on temporary debt deal

Tuesday’s gains among the major Wall Street indexes were led by the Nasdaq, which was helped by shares of Nvidia (NASDAQ:NVDA), amid cautious optimism that lawmakers would provisionally agree to extend the country’s debt ceiling to prevent a default.

On Sunday, Republican House Speaker Kevin McCarthy and U.S. President Joe Biden approved a deal to suspend the debt ceiling and cap some federal spending temporarily.

The U.S. House Rules Committee said it will have a meeting to examine the debt ceiling bill at 3 p.m. ET (1900 GMT).

Republican hardliner Ralph Norman indicated he would vote against the measure if it is not altered.

A few Republican members have stated they will be against it, indicating that the bipartisan accord may have difficulty getting past Congress.

According to Michael James, managing director of institutional equities trading at Wedbush Securities, “it’s a bit of mixed sentiment; on the one hand, there’s an exhale of relief that something has gotten done, but on the other hand, the markets have gotten pretty extended.”

The S&P 500 index was hovering above 4,200 points, close to its highest peak since August 2022.

Separately, on Tuesday, longer-dated U.S. Treasury yields decreased in line with confidence regarding the temporary debt ceiling agreement. In contrast, the cost of insurance exposure to a U.S. debt default decreased even further.

The market capitalization of the most expensive chipmaker in the world, Nvidia Corp, first crossed the $1 trillion threshold, increasing 4.2% to a record high.

The Philadelphia SE Semiconductor index increased 1.0% earlier in the afternoon, reaching its highest level since February 2022. The technology sector of the S&P 500 rose 1.1%.

According to Thomas Hayes, chairman of Great Hill Capital LLC, “if this AI trend is real, the immediate demand will be in chips and computing power… and Nvidia is the poster child for AI at the moment.”

The S&P 500 was up 3.47 points, or 0.08%, at 4,208.92 at 12:22 p.m. ET, while the Nasdaq Composite was up 68.09 points, or 0.52%, at 13,043.78. The Dow Jones Industrial Average was down 117.43 points, or 0.35%, at 32,975.91.

According to data, consumer confidence increased more than anticipated in May, possibly encouraging wagers that the Federal Reserve may not be finished raising interest rates.

Traders are now pricing for a 64% chance of a 25 basis point increase at the Fed’s June 13-14 meeting. [FEDWATCH]

The data arrived before the Labor Department’s closely watched nonfarm payrolls data for May on Friday.

The S&P 500 energy sector index fell 1.5%, tracking lower oil prices. [O/R]

Shares of Tesla (NASDAQ:TSLA) increased 3.5%, adding to Friday’s gains. Elon Musk, a top executive, touched down in Beijing, the capital of China, on Tuesday for the first time in three years.

Even with the overhang of the debt ceiling debate, the S&P 500 and the Nasdaq are set for gains in May.

Declining issues outnumbered advancers for a 1.07-to-1 ratio on the NYSE and for a 1.21-to-1 ratio on the Nasdaq.

The S&P index recorded 20 new 52-week highs and 17 new lows, while the Nasdaq hit 81 new highs and 89 new lows.