After a couple of days of pessimism over the debt ceiling, the market rallied after Biden and McCarthy got closer to a deal. The sides are reported to be only 70 billion apart in proposed discretionary spending. But this deal should be written debated and voted on in Congress, which could take around 3 days. So, this is a very last-minute deal and the new legislation might not be passed by the June 1 deadline. However, a default seems very unlikely at the moment.
Nasdaq led the rally and the S&P followed, the DOW is lower as of 19:48. Another factor that contributed to this rally might be the released Fed minutes, which signaled a pause in the rate hikes for its next meeting.
Even the default risk, however, cost the US billions of dollars, driving the stock market down and the cost of borrowing up for the country. The past default concerns are believed to have caused permanent increases in the US bond yields, which indicate a higher cost of borrowing and lower growth in the long term.
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