Markets rise on hopes that a debt ceiling deal can be reached

Dow climbed 328, advancers over decliners about 5-2 & NAZ was up 277.  The MLP index remained in the 223s & the REIT index gained 3+ to the 353s.  Junk bond funds rose along with the stock market & Treasuries were flattish with keeping interest rates about even.  Oil was up 1 to the high 72s & gold inched up 1 to 1945 (more on both below).

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Moody's Investors Service expects the ongoing standoff over raising the US debt limit to be resolved in time to avoid the nation defaulting on any bills, but says a downgrade is coming if the Treasury Dept fails to make its $2B interest payment due Jun 15.  "That's a really important date for us," Moody's Senior VP William Foster said.  Even failing to make a small payment means a ding is coming, he explained, adding, "if it was missed, that's a default. We'd downgrade the rating by one notch from AAA to AA1."  The outlet noted Foster "emphasized" that the rating agency anticipates the Biden administration & Reps will reach a deal in time to avert what would be the first default in US history & Moody's still holds a stable outlook on the nation's AAA rating, for now.  Treasury Secretary Janet Yellen has warned repeatedly that default could happen as early as Jun 1, meaning just days remain for the White House & GOP lawmakers to come to an agreement on raising the debt limit in what has been a prolonged political battle between Reps, who control the House, & Pres Biden & his fellow Dems, who control the Senate.  The situation led credit ratings agency Fitch Ratings this week to place the US's AAA rating on negative watch, pointing to "increased political partisanship that is hindering reaching a resolution to raise or suspend the debt limit despite the fast-approaching x date."  Fitch also said it expects an agreement to be reached in time to avoid any missed payments, but the analysts wrote they "believe risks have risen that the debt limit will not be raised or suspended before the x-date and consequently that the gov could begin to miss payments on some of its obligations."

US could lose AAA rating if $2B interest payment isn't made by mid-June

Consumers increased their spending sharply last month & inflation accelerated, fresh data showed, as the Federal Reserve debates whether to raise interest rates in Jun & as negotiators race to meet a debt-ceiling deadline.  Consumer spending, the primary driver of economic growth, rose 0.8% in Apr, the Commerce Dept reported, boosted by higher spending on vehicles & services such as insurance & healthcare.  Apr's report came after 2 months of weaker spending, with Mar & Feb both up 0.1%.  The Fed's preferred gauge of consumer inflation, the personal-consumption expenditures price index, rose 0.4% in Apr from the prior month & 4.4% from a year earlier.  When excluding volatile food & energy costs, prices rose 0.4% in Apr from the prior month & 4.7% from a year earlier.  Economists see core inflation as a better predictor of future inflation.  Over the past 6 months, senior Fed officials have focused on prices for a subset of labor-intensive services by excluding food, energy, shelter & goods.  Officials believe that category could reveal whether wage pressures from the solid labor market are passing through to consumer prices.  That reading rose 0.4% in Apr from the prior month & increased 4.6% from a year earlier.  The Fed’s inflation target is 2%.  The Fed has increased interest rates at 10 consecutive meetings since Mar 2022 as it tries to slow investment, spending & hiring to reduce high inflation.  This report offers clues on the extent to which the central bank has more work to do to lower inflation.  The next Fed policy meeting is Jun 13-14.  US economic growth cooled in Q1.  But a solid labor market has kept unemployment low & wage growth elevated, providing fuel for consumer spending, the main driver of economic growth.  Americans increased spending at stores, restaurants and& online in Apr for the first time in 3 months.  US economic activity rose in May to its highest pace in 13 months.  But a prolonged political fight over the nation's borrowing limit threatens to push the economy into recession or, should the gov default on its debt, trigger a financial crisis.

US consumer spending jumped in April and inflation accelerated

Inflation stayed stubbornly high in Apr, potentially reinforcing the chances that interest rates could stay higher for longer, according to a gauge released today that the Federal Reserve follows closely.  The personal consumption expenditures price index (PCE), which measures a variety of goods & services & adjusts for changes in consumer behavior, rose 0.4% for the month excluding food & energy costs, higher than the 0.3% estimate.  On an annual basis, the gauge increased 4.7%, 0.1 percentage point higher than expected, the Commerce Dept reported.  Including food & energy, headline PCE also rose 0.4% & was up 4.4% from a year ago, higher than the 4.2% rate in Mar.  Despite the higher inflation rate, consumer spending held up well as personal income increased.  The report showed that spending jumped 0.8% for the month, while personal income accelerated 0.4%.  Both numbers were expected to increase 0.4%.  Price increases were spread almost evenly, with goods rising 0.3% & services up 0.4%.  Food prices fell less than 0.1% while energy prices increased 0.7%.  On an annual basis, goods prices increased 2.1% & services rose by 5.5%, a further indication that the US was tilting back toward a services-focused economy.  Food prices rose 6.9% from a year ago while energy fell 6.3%.  Both monthly PCE gains were the most since Jan

Inflation rose 0.4% in April and 4.7% from a year ago, according to key gauge for the Fed

Gold futures finished a bit higher, but still logged a 3rd straight weekly loss.  Gold's attempted recovery ahead of the weekend was dampened a bit by further evidence of still-stubborn US inflation.  Prices for the metal may decline further, closer to the psychologically-important $1900 level if the US debt deal is sealed in the immediate future.  Gold for Jun edged up pennies to settle at $1944 an ounce.  For the week, the most-active contract fell 1.9%.

Gold futures tally a third straight weekly decline

Oil futures climbed, contributing to a more than 1% weekly gain in US benchmark crude prices.  The market saw a sharp decline yesterday on expectations that OPEC+ wasn't likely to cut production at its meeting next month, but the risk of further sharp falls is being mitigated somewhat by the fact that the markets know the US gov is a buyer of oil  below $70, as it looks to refill the Strategic Petroleum Reserve.  Jul West Texas Intermediate crude rose 84¢ (1.2%) to settle at $72.67 a barrel, with prices for the front-month contract for the week.

Oil futures end higher for the session, with U.S. prices up over 1% for the week

Stocks had a very choppy week with all the excitement about raising the debt ceiling.  Dow finished down 333, not too bad considering all the drama in DC this week.

Dow Jones Industrials