House Passes Bill to Fund Government, Averts Shutdown; Senate’s Vote Looms
Investors breathed a sigh of relief on Wednesday morning, as US stock futures indicated a higher open for the major indexes. The positive sentiment came after the House of Representatives approved a bill late Tuesday night that would fund the government through December 3, averting a potential shutdown that could have disrupted the economy and the markets.
The bill, which passed by a vote of 220 to 211, with no Republicans supporting it, now heads to the Senate, where it faces an uncertain fate. The Senate must act by Thursday night to prevent a lapse in federal funding that would affect millions of workers and services. The bill also includes a suspension of the debt ceiling until December 2022, which would allow the government to continue paying its bills and avoid a default that could trigger a global financial crisis.
However, some Republican senators have vowed to block the bill, arguing that raising the debt limit would enable more spending by the Democrats, who are pursuing a $3.5 trillion social and environmental package. The Democrats have said they will not negotiate with the Republicans over the debt ceiling, which they say is a bipartisan responsibility that has been raised dozens of times under both parties.
The impasse over the debt ceiling could overshadow the positive news from the House vote, which lifted some of the uncertainty that has weighed on the markets in recent weeks. The Dow Jones Industrial Average futures rose 0.4%, while the S&P 500 futures and the Nasdaq 100 futures gained 0.5% and 0.6%, respectively, as of 6:30 a.m. ET Wednesday.
Optimism about the economic recovery also contributed to the market rally, as data showed that consumer confidence rebounded in September after a sharp drop in August. The Conference Board’s consumer confidence index rose to 109.3, surpassing expectations and indicating improved consumer sentiment regarding current economic conditions and future outlook.
The boost in consumer confidence is a positive sign for consumer spending, which accounts for about 70% of US economic activity. Despite the challenges posed by the Delta variant, which has dampened business activity and hiring, consumer spending has remained resilient. In August, personal income rose 0.2% and personal spending increased 0.8%, both exceeding expectations, according to the Commerce Department.
In addition to the political and economic developments, investors are closely watching the Federal Reserve’s monetary policy plans. Fed Chair Jerome Powell is expected to testify before the House Financial Services Committee and reiterate the central bank’s intention to start tapering its monthly bond purchases as early as November, if the economy continues to show improvement. Powell emphasized that tapering does not imply tightening, and interest rates will remain near zero until the Fed’s goals for inflation and employment are met.
Meanwhile, the market is anticipating the release of the ADP private payrolls report, which provides a glimpse into the state of the labor market and recovery. The report is expected to show an increase of 428,000 jobs added in September, signaling improving employment figures. This report is often seen as a precursor to the nonfarm payrolls report, which will be released on Friday, and is a key indicator of labor market health.
Wednesday’s data releases also include the final reading of second-quarter GDP growth, expected to remain unchanged at 6.6%, and pending home sales for August, which are projected to rise by 0.4% following a decline in July.
As the Senate vote on the bill and the debt ceiling debate loom, investors will be closely monitoring the outcome, as it may have significant implications for the economy and financial markets. The market rally and improved consumer confidence provide some optimism, but the uncertainty surrounding the political negotiations underscores the need for caution.
