Dow Jones up as US Congress reaches deal to avoid government shutdown

Wall Street sign after Dow Jones up after no government shutdown Source: Bloomberg

Wall Street is pleased with the news that the US Congress has tentatively reached a deal to avert a government shutdown. The Dow Jones has risen by as much as 200 points in trading after the news.

Why is the Dow Jones up now?

The Dow Jones is up after lawmakers in Congress reached an agreement ‘in principle’ to a compromise on funding for a proposed wall along the US-Mexico border. Republicans and Democrats agreed to build a type of fencing between the two nations to try to deter undocumented immigration. They also approved a reduction in the number of undocumented immigrants detained by the Immigrations and Custom Enforcement (ICE) agency.

While the pact has yet to be approved by US President, Donald Trump, Wall Street is still relieved about the potential deal. There is also optimism about a possible US-China trade agreement. Societe Generale’s Global Strategist, Kit Juckles, wrote that investors feel more comfortable taking risks now that there are some concessions in those volatile issues.

‘The US government shutdown seems to have been averted and there’s a strong chance that import tariffs on Chinese goods will be postponed. Risk is on,’ wrote Juckles.

Will the US stock market rally last?

While the Dow Jones is up now, the surge in stocks may not last if the US-China trade negotiations fall through or the US government shutdown happens again. Ironically, Trump who is not known to compromise, may have to find common ground on both issues to keep Wall Street happy. Chris Rupkey, chief economist at MUFG Union Bank in New York, wrote that the US stock market could benefit from Trump negotiating more with his political rivals.

'The market has been held back by uncertainty from a potential second federal government shutdown and questions about the U.S. trade talks with China. But we are entering the next presidential election cycle in 2020, and we expect the Trump administration will find more reasons to compromise at least on economic issues than they have in the last couple of years,’ wrote Rupkey.

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