Markets climb as traders bet on a debt ceiling deal being reached

Dow advanced 408, advancers over decliners better than 3-1 & NAZ gained 167.  The MLP index added 1+ to the 223s & the REIT index went up 3+ to the 371s.  Junk bond funds rose along with the higher stock market & Treasuries were sold, raising yields.  Oil gained almost 2 to the 72s & gold slipped back 5 to 1887 (more on both below).

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As the House Speaker & Pres Biden's office prepare to enter refreshed debt ceiling negotiations, Rep Kevin McCarthy has reiterated the GOP's intentions not to move on their hard lines.  "The one thing you know about me," House Speaker McCarthy said, "I never give up. We have the perseverance and the grit, so we're going to sit in the room and we're going to get this done."  After 104 days of back-and-forth with Biden on debt limit negotiations, McCarthy claimed they reached a "structure" agreement to start reevaluating fiscal common ground that avoids a debt default.  "The president finally admitted he would negotiate. He would assign two people from his administration to negotiate with us. We started last night," he explained.  "So we finally have a process, a structure that has worked every time in the past, but now we have a short time frame to get the job done."  Pres Biden is cutting his intl trip short amid the debt ceiling time crunch, despite still leaving for the 3-day G-7 summit in Hiroshima, Japan.  The pres had planned to visit Sydney, Australia, next week, but told reporters he spoke with Australian Prime Minister Anthony Albanese about his decision to postpone the trip.  "Defaulting on the debt is simply not an option," Biden said.  Speaker McCarthy expressed his optimism that the negotiation structure currently in place will prove successful, but said the pres has largely ignored Reps' proposed Limit, Save, Grow Act.  "We've got to spend less than we spent before to curb inflation," McCarthy noted.  "We've got to be able to build things in America again. That's where we're going to cut red tape, let projects and permitting process actually work."  "There's a lot of places where we need to save money, like COVID money that you appropriated for two years and nobody spent. That’s common sense," the House Speaker continued.  "Why do we have to fight over that to bring that back to the hardworking taxpayer? That's what's crazy."  While the GOP's debt ceiling bill may not "solve all of our economic problems," the House Speaker further argued it will improve the state of the economy.  "If you look at the 50-year average, the amount of money that we bring into government, normally you bring in about 17% of GDP. We're bringing in 20%," McCarthy claimed of the Limit, Save, Grow Act.  "Only two times in modern history have we ever met this, in 1944 and 2000."  "I don't want to have a Biden default. I want to make sure America is strong," McCarthy added. "That's why we raised the debt limit, we passed a bill, and now we're finally in the room where we can negotiate."

Speaker McCarthy doubles down on GOP’s debt ceiling stance

New US home construction rebounded in Apr as limited inventory helped to jolt homebuyer demand, but the housing market remains in a slump.  Housing starts climbed 2.2% last month to an annual rate of 1.4M units, according to new Commerce Dept data.  That is above the forecast for a decline.  In a sign the deep freeze that has paralyzed the housing market for months is not over yet, housing starts remain down 22.3% compared with the same period one year ago.  "Housing starts and permits both gained some traction in April from March along with a boost in sentiment, but these increases are slight," said Nicole Bachaud, Zillow senior economist.  "Compared to the building boom in 2021 and 2022 however, new construction has slowed considerably."   Applications to build, which measures future construction, also tumbled 1.5% to an annualized rate of 1.42M units.  The data comes one day after the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, rose 5 points to 50, the highest reading since Jul.  It marked the first time in nearly a year that the index pulled out of negative territory. Any reading above 50 is considered positive; prior to 2022, the gauge had not entered negative territory since 2012, excluding a brief, but steep, drop in May 2020.  "The good news is that home builder sentiment increased in April to positive territory for the first time since last summer, likely thanks to the low inventory of existing homes on the market meeting with spring home shopping demand," Bachaud said.  "With renewed energy running through the spring housing market, hopefully home building activity will continue on an upward trajectory to add vital inventory when it’s needed the most."  Still, the gauge still indicates the housing market is in a slump.  The index has fallen to about ½ of what it was just one year ago, when it stood at 81, although it has increased from a low of 31. It peaked at a 35-year high of 90 in Nov 2020, buoyed by record-low interest rates at the same time that American homebuyers, flush with cash & eager for more space during the pandemic, started flocking to the suburbs.

Housing starts unexpectedly increase in April after falling in March

Target (TGT), a Dividend Aristocrat, expects to take a more than $500M hit in profits this year due to brazen retail theft that's worsening at its stores, CEO Brian Cornell warned.  "Worsening shri)idend Aristoctat, a Divnk rates are putting significant pressure on our financial results," Cornell said, adding that "when products are stolen, simply put, they're no longer available for our guests who depend on them."  "Violent incidents are increasing" at TGT & throughout the retail industry, Cornell added.  To mitigate the worsening issue TGT said it "engaged in a variety of mitigation efforts which begin with significant resource investments to protect our team and our guests."  The company is also installing fixtures to protect merchandise & adjusting its assortment in affected stores.  However, Cornell said this is an issue that can't be solved by a single retailer, which is why the company is "actively collaborating with legislators, law enforcement and retail industry partners to advocate for public policy solutions so that organized retail crime."  Still, the company doesn't want to close stores, saying it would hurt communities that rely on them as well as its employees.  "We'll continue to do everything in our power to keep our doors open," Cornell added.  "At the same time, we'll be closely monitoring the safety of our team and guests, as well as the financial impact to our business as we determine the right path forward at Target."  This also marked the 5th-consecutive qtr that the retailer's profit has fallen.  First-qtr EPS slipped 6% to $2.05.  Sales rose 0.6% to $25.3B, up from $25.2B in the year-ago qtr.  TGT projects EPS to be $1.30-1.70 in the current qtr.  Analysts were expecting $1.95.  For the full year, the company is maintaining its prior guidance of $7.75-8.75.  Analysts are expecting $8.36.  The stock rose 3.95.
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Target CEO warns rising crime, retail theft will hit profits

Gold futures declined for a 2nd straight session to settle at their lowest in 7 weeks.  Although the uncertainty with respect to the debt ceiling talks should be a positive for gold, this week's stronger $ & rising US interest rates are more than compensating, leading to the weaker tone for the precious metal.  Gold for Jun settled at $1984 an ounce, down $8 (0.4%) for the session.  That was the lowest most-active contract finish since Mar 29.

Gold futures settle at their lowest since late March

Oil futures finished sharply higher, as Pres Biden voiced confidence that an agreement on the debt ceiling will be reached, easing worries about the nation's economy & energy demand.  Investors are increasingly hopeful there will be a resolution in US debt talks, while forecast of a tighter oil market in H2 of the year is also helping to keep the bulls happy.  Jun West Texas Intermediate crude rose $1.97 (2.8%) to settle at $72.83 a barrel.

Oil futures rally with market optimistic the U.S. will reach a deal on the debt-ceiling

Dow had a strong advance in the AM & then stayed at those elevated levels in the PM.  Traders still have their fingers crossed on a debt deal.

Dow Jones Industrials