Dow rose 123, advancers over decliners 2-1 & NAZ gained 53. The MLP index slid back 1+ to 220 & the REIT index recovered 1+ to the 358s. Junk bond funds were mixed & Treasuries had limited buying (more below). Oil climbed back over 71 again & gold was off 4 to 1988.
AMJ (Alerian MLP Index tracking fund)
House Speaker Kevin McCarthy said that he does not think the US will default on its debt as tense negotiations over the debt ceiling continue. “I think at the end of the day we do not have a debt default,” McCarthy said. Leaders are running out of time to raise the debt ceiling before a Jun 1 deadline when the gov is set to run out of money. McCarthy met yesterday with Pres Biden alongside the VP & other top congressional leaders in an attempt to hammer out a deal before the pres left for the Group of Seven summit in Japan. McCarthy refrained from saying hat he was optimistic about the state of the talks, but said he was encouraged by Biden's willingness to negotiate. Biden also said he would cut short his trip to Asia to further engage in debt limit talks. “The only thing I’m confident about is now we have a structure to find a way to come to a conclusion,” McCarthy added. “The timeline is very right. But we’re going to make sure we’re in the room and get this done.” Lifting the debt ceiling is necessary for the gov to cover spending commitments already approved by Congress & the pres, & prevent default. Doing so does not authorize new spending. But House Reps have said they will not lift the limit if Biden & lawmakers do not agree to future spending cuts. McCarthy & House Minority Leader Hakeem Jeffries separately today agreed that negotiations were moving forward, but the 2 remained entrenched in their positions. Jeffries called a Rep request to attach work requirements to federal food benefits a “nonstarter” but said he remains optimistic about negotiations. “It was a very positive meeting yesterday,” Jeffries said. “It was calm. It was candid in terms of the discussion and I’m optimistic common ground will be found in the next week or two.”
McCarthy thinks the U.S. won’t default as debt talks inch forward
Investor pessimism surged to the highest level this year in May amid fears over a looming recession & the threat of a credit crunch for US consumers & businesses, according to Bank of America's global fund manager survey. Fund managers' optimism has tumbled 28 percentage points since Feb, the largest 2-month decline since last Apr, shortly after Russia invaded Ukraine. About 2/3 of investors are bracing for a weaker economy over the next year, the highest since Dec. Despite concerns over a weaker economy, a majority of investors see a soft landing as the most likely outcome for global economic growth & expect just a small contraction in earnings. At the same time, nearly ½ of investors project a recession in the next 12 months. It marked the most bearish survey of 2023. About 33% of participants in the survey identified the bank credit crunch & a global recession as the top risk to markets. That compares to about 29% who highlighted sticky inflation that keeps central banks on a hawkish trajectory as the biggest threat. Another 15% are worried about geopolitics, such as the war in Ukraine or tensions between China & Taiwan, worsening, while 12% think the biggest threat is a systemic credit event. Just 8% of respondents identified the looming debt ceiling deadline as the biggest tailwind to global economic growth. The BofA survey comes amid a prolonged standoff over the debt limit . Reps, who control the House, passed a bill that raises the borrowing limit, & also includes budget cuts. In turn, Pres Biden & his fellow Dems, who control the Senate, have insisted on a "clean" debt ceiling bill & will negotiate any spending cuts separately. Although an overwhelming share of investors, about 71%, expect a debt ceiling resolution ahead of the X-date, that is a marked drop from 80% who anticipated a deal in Apr.
Investors are the most pessimistic this year amid credit crunch, recession fears
Treasury yields were mixed as investors assessed what could be next for the economy amid concerns about the debt ceiling & a recession. The yield on the 10-year Treasury was last down by 2 basis point at 3.526% & the 2-year Treasury yield was last trading flat at 4.076%. Yields & prices have an inverted relationship. One basis point is equivalent to 0.01%. Investors fretted over the state of the US economy as negotiations about raising the debt ceiling continued, with participants last saying progress was being made. A solution must be found before Jun 1, or lawmakers risk the US defaulting on its debt obligations. Elsewhere, investors weighed what could be next for Federal Reserve interest rate policy. Investors had been hoping for rates to be cut later this year off the back of data that indicated an easing of inflationary pressures. Yesterday, Cleveland Fed Pres Loretta Mester said that she does not believe the central bank has reached a point at which rates can be held steady & needed to stick to its current approach as inflation remained sticky. That echoed the tone of Fed officials who in recent days indicated that more work needs to be done to bring inflation down & that further rate hikes are not off the table. Other Fed speakers have, however, urged caution, noting that the impact of higher rates hasn’t been fully felt.
10-year Treasury yield dips as investors weigh U.S. economic outlook
Traders are watching very closely the debt ceiling talks. There is not much investors can do but wait for developments. The Dow remains close to its almost 2 month lows (shown below),Dow Jones Industrials
No comments:
Post a Comment