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17.05.2023 02:40 PM
US premarket on May 17. Optimism on Wall Street gradually recovers

Following a new round of talks between President Joe Biden and Congress on the debt ceiling, the US stock market increased slightly. Optimism was fueled by expectations of an agreement on the debt ceiling. Futures on the S&P 500 rose by 0.25%, while the high-tech NASDAQ jumped by 0.3%. The Dow Jones remained unchanged. US Treasury notes also stabilized after a rise a day earlier. The Biden administration and Congress said they would continue to try to resolve a three-month standoff over the $31.4 trillion debt ceiling and avoid a default.

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Concerns that lawmakers will not be able to prevent a default before June 1 have subsided slightly. The problem remains unresolved. Yet, there is still enough time for this.

As I have mentioned above, Treasury note yields rose on Tuesday, with the 30-year government bonds growing to about 3.9%. This is the highest level since the banking crisis.

The US stock market failed to reach its annual highs after a rally of almost 9% this year. As a result, stocks got trapped in the sideways channel. They are likely to stay there until policymakers reach an agreement on the debt ceiling. Investors are also worried about the slowdown in economic expansion.

They hope that after the return of Joe Biden from a shortened trip to Asia, policymakers will be able to reach a deal over the debt ceiling. If so, a rally in the stock market may occur. Besides, every drawdown that happens during this period could lead to an increase in long positions as only a few believe that the United States will default on its debt on June 1.

The oil market remains calm as well as the precious metals market.

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As for the technical outlook of the S&P 500, bulls maintain the upper hand. So, the bullish trend may continue. The index should consolidate above $4,116. It could return to $4,150. After that, a breakout of $4,184 could occur. Bulls need to take control over $4,208, which will boost the bull market. In the case of a downward movement due to low lack demand and the risks of high inflation, bulls will have to defend $4,116. A breakout of this level will trigger a decline to $4,091 and $4,064.

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