Markets slip lower as investors eye debt-ceiling talks and vote in DC

Dow was off 131, decliners over advancers 4-3 & NAZ declined 82.  The MLP index pulled back 1+ to the 219s & the REIT index was up 2 to the 357s.  Junk bond funds fluctuated & Treasuries continued to see strong buying.  Oil dropped 1+ to 68 after yesterday's fall & gold added 5 to 1982 (more on both below).

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US job openings unexpectedly jumped in Apr to the highest level in 3 months, keeping pressure on Federal Reserve policymakers as they try to cool the economy with an aggressive interest-rate hike campaign.  The Labor Dept said that there were 10.1M job openings in Apr, an increase from the upwardly revised 9.75M openings reported in the previous month.  The forecast expected a reading of 9.38M.  It marked a major increase from Mar, when the gov reported an upwardly revised 9.75M number of available jobs.  Job openings remain historically high.  Before the COVID-19 pandemic began in early 2020, the highest on record was 7.6M.  There are roughly 1. 7 jobs per unemployed American.  The Federal Reserve closely watches these figures as it tries to gauge labor market tightness & wrestle inflation under control.  The higher-than-expected figure indicates that demand for employees still far outpaces the supply of available workers.  The central bank has responded to the inflation crisis & the extremely tight labor market by raising interest rates at the fastest pace in decades.  Officials have so far approved 10 straight rate hikes & have signaled that another increase is on the table at their Jun meeting following a slew of surprisingly hot economic data.  The latest jobs data could give policymakers more space to hike again.  Traders are now pricing in a 66.3% chance of another qtr-percentage-point increase during the Fed's Jun 13-14 meeting, a significant rise from just one day ago, when 36.4% projected another hike, according to the CME Group's FedWatch tool.  The number of Americans quitting their jobs, meanwhile, was mostly unchanged at 3.8M, or roughly 2.4% of the workforce, indicating that workers remain confident they can leave their jobs & find employment elsewhere.

Job openings unexpectedly surge to highest level in 3 months

One top Fed bank official doesn't see a reason to pause interest rate hikes.  Pres of the Federal Reserve Bank of Cleveland, Loretta Mester said there was no "compelling" reason to wait before implementing another interest rate rise should economic data confirm that more must be done to bring US inflation under control.  The Fed bank pres was pushing back against recent suggestions from some policymakers who argued the US central bank should forego a rate rise at its next meeting in Jun.  The agreement this weekend between the White House & Rep congressional leaders on the US borrowing limit "relieved uncertainty about the economy," Mester added.  The deal will be put to a vote in the House of Representatives later today.  There has been division among policymakers over fresh rate rises, with some officials hinting at a pause in Jun.  Mester said she could still be swayed by incoming employment data due on Fri as well as the next inflation report, which will be released ahead of the next Fed meeting on starting Jun 13.  The Fed has raised its benchmark rate by more than 5 percentage points in a little over a year.  The fed funds rate now hovers at 5.00-5.25%.  Mester is not currently a voting member of the policy-setting Federal Open Market Committee.  Fed chair Jay Powell recently hinted he supported a pause, pointing to the number of rate rises the Fed has implemented.

Fed's Mester sees no 'compelling' reason to halt rate hikes: report

House Speaker Kevin McCarthy & White House officials worked to shore up support for a bill that would raise the debt ceiling & cut gov spending, as the House prepared to vote on the legislation.  Congress & the White House are rushing to pass the legislation before Jun 5, the earliest date the US risks a first-ever sovereign debt default.  Treasury Secretary Janet Yellen has said federal funds could dry up in the coming days unless lawmakers raise the borrowing limit.  Failure to do so would roil global financial markets, spark job losses in the US & jeopardize vital gov benefits for Ms of Americans.  To prevent what Yellen has called a potential “catastrophe,” congressional leaders will need to win support for the agreement from both parties in a divided Congress.  The GOP-controlled House is expected to vote tonight, followed by the Dem-held Senate later this week.  According to informal party whip counts, more than 30 House Reps, mostly conservative hardliners, planned to vote against the Fiscal Responsibility Act, despite lobbying from party leaders.  Dems were also divided heading into today's votes, although it was difficult to gauge the full extent of the opposition.  Rep Pramila Jayapal, chair of the Congressional Progressive Caucus, said she would vote against the bill, but as of midday the caucus itself had not taken an official position.  House Dem leadership planned to back the deal, despite the fact that it was negotiated by the White House with little participation from Dems in Congress.  “I support it without hesitation or reservation or trepidation,” Democratic Leader Hakeem Jeffries said.  “Not because it’s perfect, but in divided government we cannot allow the perfect to be the enemy of the good.”  The center-left New Democrat Coalition also backed the bill, saying in a statement that its 94 members would “ensure that this bill gets to President Biden’s desk without unnecessary delay.”  The 64 member bipartisan Problem Solvers Caucus endorsed the plan, all but guaranteeing that the 32 Dems in the caucus would cast their votes for the bill.  The significance of these pockets of Dem support became increasingly clea, as both parties recognized that McCarthy would need Dem votes just to get the debt limit bill to the House floor for a final vote, let alone to actually pass it.

Biden, McCarthy work to shore up support for debt ceiling bill ahead of House vote

Gold futures ended with a gain, but overall strength in the $ was among the reasons why prices for the metal posted a loss for the month.  A debt deal is not necessarily bad news for gold.  Congress appears to be in a position to pass a debt deal that will avoid a catastrophic default, which initially was hurting gold prices.  The details behind the proposed piece of legislation, however, includes significantly lower spending, which will be a major blow to the economic outlook & likely trigger a much harder hitting recession.  Gold for Aug climbed $5 to settle at $1982 an ounce, with most-active prices logging a monthly decline of 1.8%.

Gold Futures End Higher, Post a Loss for the Month

Oil futures declined after weak economic data out of China underlined worries about demand from one of the world's largest crude importers.  Overall, concerns about demand helped pull US oil prices down by more than 11% for the month.  West Texas Intermediate crude for Jul fell $1.37 (2%) to settle at $68.09 a barrel.  Prices based on the front month, which settled at their lowest since Mar 20, marked a monthly loss of 11.3%.  Jul Brent crude the global benchmark, lost 88¢ (1.2%) at $72.66 a barrel on the contract's expiration day, ending 8.7% lower for the month.  Aug Brent the near front-month contract, shed $1.11 (1.5%) to $72.60 a barrel.  Oil prices got slammed on concerns that the Chinese economy hit a brick wall, talk that OPEC won't back up the tough talk by Saudi Arabia & the possibility that the US might be working towards a plan that could lead toward the lifting of some sanctions on Iran.  A Jun 4 meeting of OPEC+ is in focus.  Saudi Arabia's energy minister earlier this month warned that short sellers should “watch out,” remarks that were viewed by analysts as a warning that a further round of production cuts could be in the offing.

U.S. oil futures settle at lowest since March

For the month, Dow lost 1100.  All eyes will be watching the vote in DC tonight.  The indications are that it will be very close.

Dow Jones Industrials