Major indexes on Wall Street rallied in trading on Thursday as hopes grew that the US Senate would swiftly advance the debt ceiling bill and avoid a default.
The Dow Jones climbed 153 points, or 0.47 per cent, while the S&P 500 rose 0.99 per cent. The Nasdaq 100 was up 1.31 per cent at market close today.
Senate majority leader Chuck Schumer said the chamber would stay in session until the bill is passed. A vote could come as soon as Friday to suspend the nation's $31.4 trillion debt limit.
“The Senate will stay in session until we send a bill avoiding default to President [Joe] Biden’s desk,” Mr Schumer said.
The bill advanced out of the House after a 314-117 vote on Wednesday night.
The White House said Mr Biden wants to sign the bill, titled the Fiscal Responsibility Act of 2023, by the Treasury Department's June 5 deadline.
Republican minority leader Mitch McConnell also supported the bill, signalling the two leaders would work together to guide it through the upper chamber despite some opposition from their colleagues.
With Democrats holding a 51-49 majority in the Senate, nine Republicans must vote in favour for the bill to pass.
Mr Biden urged the Senate to take up the bill as soon as possible.
“I have been clear that the only path forward is a bipartisan compromise that can earn the support of both parties. This agreement meets that test,” he said in a statement.
The bill, which comes after weeks of negotiations between the White House and Republican leadership, caps non-defence spending in 2024 and 2025.
It will also claw back unused funding allocated for the Covid-19 pandemic, issue new work requirements for social programmes and increase defence spending to $886 billion.
Senators across both sides of the aisle raised objections to some of the provisions in the bill, including on defence spending.
But any changes to the bill would delay its progress as it would have to be sent back to the House for approval.
Doing so would certainly mean that Congress would miss the default deadline.
“Any needless delay or any last-minute hold-ups would be an unnecessary and even dangerous risk … the vast majority of senators recognise that passing this bill is supremely important,” Mr Schumer said.
The non-partisan Congressional Budget Office said the bill would reduce the US budget deficit by $1.5 trillion over the next decade.
Fed official hints at June pause
Also boosting Wall Street on Thursday was the possibility that the Federal Reserve could pause its interest rate increases next month.
Fed Governor and vice chairman nominee Philip Jefferson said on Wednesday that “skipping” a rate increase would give the central bank more time to assess economic data before deciding on “additional policy firming”.
More than two-thirds of traders now expect the Fed to keep rates steady at the conclusion of its June 13-14 meeting, data from the CME Group showed.
An ADP survey showed the US labour market remained strong, with private payrolls increasing by 278,000.
The median estimate of Bloomberg economists projected an increase of 170,000, but wage growth slowed, according to ADP data, in a positive sign for the Fed.
“This is the second month we've seen a full percentage point decline in pay growth for job changers,” said ADP chief economist Nela Richardson.
The Labour Department on Friday will release the May jobs report, which could sway the central bank on whether to pause rates or issue another increase.
