2023-05-30 23:38:00
(CNN) — The partial agreement on the debt ceiling reached in Washington has not sparked a celebration in the stock market. But the bipartisan compromise is setting off fireworks for some companies that came out on top.
Shares of pipeline company Equitrans Midstream rose on Tuesday because the deal contains a surprising call to speed up the creation of a crippled natural gas pipeline, called the Mountain Valley Pipeline. Stocks ended the day up regarding 35%.
Equitrans is the main promoter of the gas pipeline project, known as MVP and defended by Democratic Senator Joe Manchin.
Although the bill has yet to pass Congress and analysts warn it might hit a snag, Wall Street is wasting no time in backing the MVP and driving Equitrans Midstream shares higher.
Still, environmental groups and some progressives are furious over the inclusion of the Mountain Valley pipeline in the deal. The Sierra Club asked Congress to reject the deal and pass a clean bill to raise the debt ceiling.
End of the student debt freeze?
Wall Street is also betting lending firm SoFi will cash in on the debt ceiling deal, as it expects borrowers to start paying back federal student loans by late summer. Shares of SoFi, a leader in student loan refinancing, rose 5% Tuesday morning.
Isaac Boltansky, BTIG’s director of policy research, said in a note to clients that the deal “should be viewed as directionally positive” for SoFi as there may be “increased demand” for student loan refinancing.
However, Boltansky cautions that the Biden administration might still offer a grace period on repayment, warning that there may not be a “rush” of refinancing activity in the student loan arena due to the high costs of refinancing. the loans.
In March, SoFi filed a lawsuit once morest the Biden administration in an attempt to end the pause on federal student loan payments that has been in place since March 2020.
IRS Funding Cuts, Defense Spending Intact
Meanwhile, the debt ceiling agreement would shift a total of $20 billion in IRS funding from fiscal years 2024 and 2025 to be used in unrelated areas. with the Defense
According to BTIG’s Boltansky, this loss of funds to the IRS is a “positive” for both H&R Block and Intuit, which owns TurboTax, because it reduces the chances that the IRS will build an expansive electronic tax filing system. Earlier this month, the IRS released a cost study on developing a free electronic tax filing system and launched a limited pilot program.
H&R Block rose more than 1% on Tuesday, while Intuit shares rose slightly.
The defense industry is also emerging largely unscathed from the debt ceiling battle, unlike in 2011, when Washington agreed to significant cuts in defense spending.
The failure to cut military spending is a victory for defense contractors, who depend on the Pentagon for much of their revenue. Defense stocks such as Lockheed Martin, Raytheon and Northrop Grumman were little changed on Tuesday.
undoubtedly positive
Broadly speaking, the debt ceiling deal looks like a win for stock investors, as it eliminates the nightmare of a default (or near default) until January 2025, without resorting to spending cuts that would threaten the economy. economy.
Goldman Sachs summed up the deal as follows: “Further reduction in uncertainty, less reduction in spending.”
The Wall Street bank believes spending caps will have only “very modest effects on growth,” cutting spending by 0.1-0.2% of GDP in 2024 and 2025, compared with a forecast of reference in which financing grows with inflation.
Despite the spending caps, Goldman Sachs says inflation-adjusted discretionary spending will grow slightly next year because Congress has already approved a big spending increase for fiscal 2023.
“From a market perspective, this deal should be seen as an unquestionably positive,” BTIG’s Boltansky wrote. “It remains deeply disheartening that it took months of posturing and a looming catastrophic deadline to produce a decidedly modest piece of legislation, but Washington is prepared to avoid economic calamity and we should be thankful for that.”
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