Dow retreated 255, decliners over advancers 3-1 & NAZ declined 76. The MLP index edged down 1+ to the 125s & the REIT index tumbled 7+ to 351. Junk bond funds were mixed & Treasuries had limited selling which raised yields slightly. Oil added 1 the high 73s & gold was off 9 to 1965 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Federal Reserve officials were divided at their last meeting over where to go with interest rates, with some members seeing the need for more increases while others expected a slowdown in growth to remove the need to tighten further, minutes showed. Though the decision to increase the Fed's benchmark rate by a qtr percentage point was unanimous, the meeting summary reflected disagreement over what the next move should be, with a tilt toward less aggressive policy. At the end, the rate-setting FOMC voted to remove a key phrase from their post-meeting statement that had indicated “additional policy firming may be appropriate.” The Fed appears now to be moving toward a more data-dependent approach in which myriad factors will determine if the rate-hiking cycle continues. “Participants generally expressed uncertainty about how much more policy tightening may be appropriate,” the minutes stated. “Many participants focused on the need to retain optionality af&ter this meeting.” Essentially, the debate came down to 2 scenarios. One that was advocated by “some” members judged that progress in reducing inflation was “unacceptably slow” & would necessitate further hikes. The other, backed by “several” FOMC members, saw slowing economic growth in which “further policy firming after this meeting may not be necessary.” The minutes do not identify individual members nor do they quantify “some” or “several” with specific numbers. However, in Fed parlance, “several” is thought to be more than “some.” The minutes noted, that members concurred inflation is “substantially elevated” relative to the Fed's goal. While the future expectations differed, there appeared to be strong agreement that a path in which the Fed has hiked rates 10 times for a total of 5 percentage points since Mar 2022 is no longer as certain. “In light of the prominent risks to the Committee’s objectives with respect to both maximum employment and price stability, participants generally noted the importance of closely monitoring incoming information and its implications for the economic outlook,” the document stated.
Fed officials less confident on the need for more rate hikes, minutes show
Speaker Kevin McCarthy's top allies in the ongoing debt limit negotiations are meeting with Pres Biden's aides at the White House, as Reps & Dems race against the clock to strike a deal before the gov runs out of money to pay its obligations. The 2 sides are still "far apart" after days of talks, McCarthy told reporters. "We think we can make progress today, I’m hoping," the speaker said. Around the same time, Rep Garret Graves & Financial Services Chair Patrick McHenry departed for the White House, where they're expected to meet with Counselor to the Pres Steve Ricchetti & Office of Management & Budget Director Shalanda Young. It's a departure from the normal routine they've established in recent days, with White House staff traveling to the Capitol for talks. "There’s differences, we know where it’s at. You have to spend less than you spent last year, that’s not that difficult to do," McCarthy said today. "But in Washington, somehow, that is a problem. They have increased spending with Democrats in the majority on discretionary spending by more than 33% -- no household’s been able to afford to do that." He added of the ongoing talks, "We can find ways to eliminate that. The president eliminated a lot of places that we can’t talk about, but we found a reasonable way to do it." The gov will likely have to start prioritizing its payments around early Jun if Congress does not lift or suspend the debt limit. Dems have insisted on it being done without preconditions, while Reps are pushing for spending cuts outlined in their Limit, Save, Grow Act. The bill aims to raise the debt limit by $1.5T or thru Mar 2024 in exchange for cutting back spending to fiscal 2022 levels & enacting work requirements for federal benefits, among other points. But House Dems have lined up behind the White House in offering a spending freeze at 2023 levels, something the GOP says does not go far enough to slow deficit growth. McCarthy said, "They still want to spend more, you cannot do that." He said they'd offered "a lot of concessions" to Dems, pointing out that both spending caps & work requirements have come from the left in the past. McCarthy also reiterated that the GOP would not entertain any tax increases, something Biden's negotiators have floated as a means to reduce the deficit. Hardline lawmakers on McCarthy's right flank have said they will refuse to support a bill that walks back any spending cuts in the GOP's existing legislation. House Minority Leader Hakeem Jeffries said last night that House Reps are refusing "to be reasonable in trying to find common ground."
McCarthy gives update on debt talks as negotiators head to WH
Treasury Secretary Janet Yellen reiterated the US gov could run out of cash to pay its bills by early Jun, putting the country on a collision course for a potentially catastrophic default on its financial obligation. "It’s highly likely that we would run out of resources to meet all the government’s obligations in early June and possibly as early as June 1," she said. "We no longer see very much likelihood that our resources will enable us to get to the middle or end of June." Yellen said she planned to update Congress "shortly, and to try to increase the level of precision" regarding the X-date – or the day when the gov can no longer pay its bills. "It’s hard to be precise about exactly which day we will run out of resources," she added. As the gov inches closer to a first-ever default, Yellen said there are signs of market stress beginning to emerge. "One of the concerns I have is that, even in the run-up to an agreement – when one does occur – there can be substantial financial-market distress," she added. "We’re seeing just the beginnings of it." This warning comes amid a prolonged standoff over the debt limit. Reps, who control the House, have promised to raise the borrowing limit only in exchange for deep spending cuts. Pres Biden & his fellow Dems, who control the Senate, prefer a "clean" debt ceiling bill without spending cuts.
Treasury secretary doubles down on looming debt deal deadline
Gold futures tallied a 3rd consecutive session decline to settle at their lowest in nearly a week. Strength in the $ pressured prices, leading gold to give up early gains that had been driven by uncertainty surrounding a US debt-ceiling deal. Gold for Jun fell $9 (0.5%) to settle at $1964 an ounce, the lowest most-active contract finish since May 18.
Gold futures down a third straight session
Oil futures settled higher, finding support after the Energy Information Administration reported a 12.5M-barrel weekly fall in US crude inventories, the biggest year to date. Meanwhile, remarks from Prince Abdulaziz bin Salman, Saudi Arabia's energy minister, yesterday, warning traders about betting on continued declines in oil prices, hinted at the potential for another output cut by major oil producers. The group of producers (OPEC+) will hold its next meeting in early Jun. Jul West Texas Intermediate crude rose $1.43 (2%) to settle at $74.34 a barrel.
Oil Futures Finish Higher, Buoyed by a Hefty Weekly decline in US crude supplies
The delay in the debt-ceiling negotiations is turning out to be longer than expected. Meanwhile, a top McCarthy aid said there are no more meetings planned. Separately, Federal Reserve officials generally agreed that
it was less certain more interest rate increases were needed, but they
were divided on the future. These are trying times for investors.
Dow Jones Industriaelayls
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