U.S. stocks are seen opening higher Monday on optimism of progress in lifting the country’s debt ceiling, but gains are limited given ongoing concerns about the overall health of the economy.
At 06:50 ET (10:50 GMT), the Dow Futures contract was up 120 points or 0.4%, S&P 500 Futures traded 16 points or 0.4% higher, and Nasdaq 100 Futures climbed 35 points or 0.3%.
Negotiations between the two political parties over the potential lifting of the country’s debt ceiling are set to resume this week, and optimism of a deal is growing after President Joe Biden expressed confidence over the weekend.
“I remain optimistic because I’m a congenital optimist,” Biden said. He said he believed there was a desire on both sides to reach an agreement. “I think we’ll be able to do it.”
The debate around raising the borrowing limit before the country is forced to default is likely to trigger some sharp swings in equity markets, according to Morgan Stanley analyst Michael Wilson, in a note.
Most clients “believe it will ultimately get resolved, but not without some near-term volatility,” he added.
The blue-chip Dow Jones Industrial Average and the broad-based S&P 500 recorded back-to-back weekly losses last week, on concerns that the Federal Reserve’s year-long aggressive tightening cycle will send the economy into recession.
The Fed lifted interest rates once more earlier this month, and it may need to continue doing so if inflation stays high, Fed Governor Michelle Bowman said on Friday, adding that key data so far this month has not convinced her that price pressures are receding.
The main economic release scheduled for Monday is the NY Fed manufacturing survey for May, but the week also sees retail sales, housing data and the weekly jobless claims.
Fed Chair Jerome Powell is set to participate in a panel discussion on monetary policy in Washington on Friday, while other Fed officials scheduled to make appearances during the week include New York Fed President John Williams, Cleveland Fed Governor Loretta Mester and Minneapolis Fed President Neel Kashkari.
In corporate news, Newmont (NYSE:NEM) is likely to be in the spotlight Monday after Australia’s Newcrest Mining (ASX:NCM) said it would back the U.S. gold miner’s approximate $18 billion takeover offer.
Crude prices edged higher Monday, helped by dollar weakness, but overall sentiment remains weak given concerns over economic weakness in the top two global oil consumers, the United States and China.
By 06:50 ET (10:50 GMT), U.S. crude futures were 0.3% higher at $70.28 a barrel, while the Brent contract edged up by 0.2% to $74.34 per barrel.
The U.S. currency retreated in early trading Monday, making dollar-denominated commodities, including crude, cheaper for holders of other currencies.
However, both benchmarks fell last week for a fourth consecutive week, the longest streak of weekly declines since September 2022, on worries over an uneven re-opening in China while the U.S. faces a potential recession.
Additionally, gold futures were up 0.1% to $2,021.15/oz, while EUR/USD traded 0.3% higher at 1.0875.
