Dow sars 300 points on closure and oil prices
The Dow jumped over 300 points on Tuesday after US politicians attempted a plan to avert another government's closure. Stocks also got a boost after Saudi Arabia decided to cut oil production. Nasdaq was up 1.4% and the broader S&P 500 was up 1.3%.
Congress dealers said late Monday, they reached an agreement in principle to avert a partial public closure at the end of this week. The deal will not be final until the Congress surpasses it, and President Donald Trump signs it – giving much room for a new development to scrap the deal. But Wall Street was optimistic that US lawmakers would avoid another crisis.
"The markets are averting uncertainty, so this is spectacular news that removes one of the major obstacles to US economic growth and prosperity and better financial market conditions," said Chris Rupkey, chief financial officer at MUFG. Last month, the US economy cost $ 1
1 billion – $ 3 billion, of which the economy will never recover, according to the congressional budget office, which is not a major disaster to the US $ 20 billion economy, but this level of political irreconcilability made Wall Street concerned about politicians' ability to agree on something potentially much more serious: raising the US debt ceiling.
In the next few months, lawmakers will have to vote to pay off debt America owes. The United States standardizes its debt payments, which may signal that America will not repay its creditors, potentially sending one shock through the US financial market, which the government trusts to fund its programs and make up for the huge budget shortfall.
Credit rating agencies have already warned that they will cut the US credit rating if lawmakers do not increase the debt ceiling, which will increase the amount of money the government needs to pay on debt payments. Credit rating agencies cut America's perfect AAA rating to AA + in 2011 when the government came close to missing out on a debt payment.
The termination agreement gives investors hope that the politicians will not get back in their foot when the bet is potentially much higher.
Oil moved higher
OPEC, the oil cartel led by Saudi Arabia, announced on Tuesday that it would cut production by 800,000 barrels a day. It eases the investor's concerns that a global economic downturn will continue to damage demand and that oil producers are not doing enough to reduce production.
The price of US crude oil rose 2% Tuesday to $ 53.56 per barrel.
Oil has risen in recent weeks after the US sanctioned Venezuela, a major supplier of crude oil around the world. The sanctions against Iran have also supported oil prices.
However, increased crude production in the US has weighed oil in the past year. Nevertheless, the price of oil can increase between 10% and 15% this year due to OPEC's production cuts and sanctions, says Francisco Blanch, head of global commodity research at Bank of America Merrill Lynch, to Julia Chatterly on CNN's "First Move" Tuesday. 19659006] Energy file rallied.