The stock markets in the United States ended the week with gains due to increasing signs of encouraging discussions in Washington, which boosted optimism among investors that the elected leaders will not allow a government default.
In a telephone interview with Bloomberg, Jim Russell, senior equity strategist at U.S. Bank Wealth Management said, “We are picking up smoke signals that there are constructive talks. It doesn’t take much imagination to see that a framework is coming together for a temporary extension of the budget ceiling, and then negotiations to reopen the government as early as next week. We do think that things are moving forward.”
The Republican lawmakers in the lower house proposed to end the government shutdown and raised the debt ceiling in exchange for budget cuts. The lawmakers sent a list of policy options to the White House that would be included in the budget legislation. President Barack Obama repeatedly stated that he would not accept any conditions to reopen the government.
The latest report from CNBC indicated that there is a continuing constructive discussion in Washington and a consensus opinion that it is necessary to raise the debt ceiling before the deadline.
Yesterday, Christine Lagarde, chief of the International Monetary Fund (IMF) said the United States must put its “fiscal house” in order, and warned that failing to raise its debt ceiling could bring severe harm to the American and global economies.
Lagarde said, “Obviously, we know, and you know by now, that failure to raise the debt ceiling would cause not only serious damage to the U.S. economy but also to the global economy as a result of the spillover effects. It is not helping the U.S. economy to have this uncertainty and this protracted way of dealing with fiscal issues and debt issues.”
- Dow Jones Industrial Average (DJIA)- 15,237.11 (+0.73%)
- S&P 500- 1,703.20 (+0.63%)
- NASDAQ- 3,791.87 (+0.83%)
- Russell 2000- 1,084.32 (+1.39%)
- EURO STOXX 50 Price EUR- 2, 974.28 (+0.16%)
- FTSE 100 Index- 6,487.19 (+0.88%)
- Deutsche Borse AG German Stock Index DAX- 8,724.83 (+0.45%)
Asia Pacific Markets
- Nikkei 225- 14,404.75 (+1.48%)
- Hong Kong Hang Seng Index- 23,218.32 (+1.16%)
- Shanghai Shenzhen CSI 300 Index- 2, 468.51 (+1.61%)
Stocks in Focus
The stock price of The Gap Inc. (NYSE:GPS), the parent company of Old Navy and Banana Republic declined 6.71% to $36.83 per share after analysts at Credit Suisse lowered their rating for the stock from outperform to neutral. The company’s same store sales dropped by 3% due to weakness in its GAP brands.
Micron Technology, Inc. (NASDAQ:MU) declined by 8.63% to $16.84 a share after analysts at Wells Fargo Equity Research recommended a sell rating for the shares of the company, despite its better than expected fourth quarter sales performance.
Meanwhile, Safeway Inc. (NYSE:SWY) gained nearly 7% to $33,75 per share after the second-largest grocery store chain in the United States reported a 1.9% increase in same store sales. The company also announced its plan to leave the Chicago market by selling its stores in the area, and it expects to generate $400 million to $450 million cash tax benefit.