Dow finished up 147 in a volatile session, advancers modestly ahead of decliners & NAZ rose 193. The MLP index gained 3+ to the 226s & the REIT index fell 2+ to the 369s. Junk bond funds slid lower & Treasuries had significant selling. Oil gave back 1 to the high 71s after yesterday's rise & gold sank 24 to 1960 (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)
Leaders on both sides of the political aisle appear to be coming closer to reaching an agreement on a deal that would raise the gov's $31.4T debt ceiling. They'll have to act quickly. In a recent letter to Congress, Treasury Secretary Janet Yellen confirmed that her department would be able to pay the US gov's bills until Jun 1 before risking default. For now, both sides seem confident a deal is forthcoming. “I think, at the end of the day, we do not have a debt default,” House Speaker Kevin McCarthy said today. Later, while speaking at the White House, Pres Biden echoed the sentiment: “We’re going to come together because these is no alternative,” he said. “Every leader in the room understands the consequences of failure.” It's welcome news, but what has become a months-long political standoff isn't over. Currently, the limit on what US is allowed to borrow is $31.4T. That limit, also known as the debt ceiling, must be raised to cover spending that Congress has approved. This isn’t unusual, the debt ceiling has been raised 45 times in the past 40 years. Actually, the US already hit it back in Jan. Ever since, the Treasury Dept has been taking “extraordinary measures” — essentially strategic short-term spending cuts — to make sure the gov can still pay its bills. Yellen estimates that these funds will last until Jun 1. The Congressional Budget Office says there’s a “significant risk” that the gov could default within the first 2 weeks of Jun if the ceiling isn’t raised. Technicalities aside, the gov has never defaulted on its debt. But this isn't the first time it's come close thanks to political stalemate. In 2011, a Rep-controlled House demanded cuts to spending in order to agree to raise the debt ceiling. Dems hoped to pass a “clean” increase devoid of cuts. Pres Obama met with Rep House Speaker John Boehner to help push a deal thru at the 11th hour. In that case, a deal was reached 2 days before the Treasury's estimated deadline. Waiting until the last minute had some adverse consequences on the economy & markets. “You could argue that there was a mini technical default with some payments getting delayed back in 2011, but the real issue was the first downgrade of US debt by [Standard & Poor’s],” says Liz Ann Sonders, managing director chief investment strategist at Charles Schwab. The move sowed panic among investors: Following news of the downgrade, they fled the stock market, creating an 18% slide in the S&P 500. The worst-case scenario is a default. If the parties can't reach a deal by early Jun, it's possible that the Treasury will run out of funds & certain payments, such as interest payments on gov bonds & salary for gov workers, could be suspended. Most financial experts don’t think it will come to that.
Dallas Federal Reserve Pres Lorie Logan said that the economic data points so far don't justify skipping a rate increase at the central bank’s next meeting in Jun. While noting some progress in bringing down inflation & cooling the labor market, Logan said the Fed still has work to do in achieving its goal for price stability. Logan is a voting member this year of the rate-setting Federal Open Market Committee. “After raising the target range for the federal funds rate at each of the last 10 FOMC meetings, we have made some progress,” she said in prepared remarks. “The data in coming weeks could yet show that it is appropriate to skip a meeting. As of today, though, we aren’t there yet.” Market pricing indicates an expectation that the Fed will hold the line at its Jun 13-14 meeting, pausing a rate-hiking cycle at began in Mar 22. The CME Group’s FedWatch gauge, which gauges prices in the fed funds futures market, puts a 26% probability for a 0.25 percentage point hike at the meeting, though the odds have been rising in recent days. Like other Fed officials who have spoken recently, Logan emphasized that the decision ultimately will be based on inflation & employment data still to come before the next meeting.
Dallas Fed President Logan says current data doesn’t justify pausing rate hikes yet
As Pres Biden reportedly prepares to tout his administration's climate change goals with fellow G-7 summit leaders, the head of one of America's largest energy companies laid out Biden's renewable energy implications. "It's really important to present the facts," TC Energy CEO Francois Poirier said. "You have to bring a little bit of reality to the conversation." Poirier & his company had owned & operated the Keystone XL Pipeline project before Biden's administration halted its construction. According to the CEO, they lost the ability to transport 800K barrels of crude oil per day from Canada to the US Gulf Coast. While advocating for an "all-of-the-above approach" to gaining greater American energy independence, Poirier also emphasized the important role natural gas plays in that equation. America's natural gas can not only help reduce emissions, he argued, but also provide energy security to the world — which Poirier additionally indicated as the message Pres Biden should give at the G-7 summit this week. "Politicians have a very difficult job trying to balance the needs and ideologies of seven different countries. What I can tell you on the ground, we talk to investors, we talk to policymakers, we talk to consumers of energy around the world, and it's very clear that they want U.S. natural gas to displace fuel oil and coal," Poirier explained, "thereby giving them energy security as well as lowering their emissions."
Keystone pipeline owner gives Biden's energy agenda a ‘reality’ check: 'Really important to present the facts'
Gold futures settled at their lowest level since late Mar, pressured by a stronger $ & hopes for a deal to raise the US debt ceiling by Congress. Gold futures for Jun declined by $25 (1.3%) to settle at $1959 per ounce, the lowest since Mar 27. Prices for the most-active contract were 3% lower week to date, poised for the largest weekly decline since last Oct. Gold futures declined for a 3rd straight session & were on track to notch their biggest weekly percentage drop since Oct as prices continued to pullback from their May 4 settlement, which was the 2nd highest on record. Both gold & silver are seeing their momentum fade as the $ dollar continues to climb, extending a recent rebound that had carried the ICE US Dollar Index to its highest level in about 2 months. In today's dealings, the index was up 0.7% at 103.60. That's a significantly bearish outside-market development for the metals markets. Rising Treasury yields this week are also a negative for the precious metals. The yield on the 10-year Treasury rose 6.5 basis points to 3.638%.
Gold prices at lowest since March as dollar rises and U.S. debt-ceiling deal looks ‘doable
Oil futures finished lower, giving back roughly ½ of what they gained in the previous session as traders continued to weigh the prospects for a deal on the US debt ceiling. Natural-gas futures, meanwhile, rallied by nearly 10% to their highest finish since mid-Mar, after the Energy Information Administration reported a smaller-than-expected weekly rise in US supplies of the fuel. Jun West Texas Intermediate crude fell 97¢ (1.3%) to settle at $71.86 a barrel. Jun natural gas gained 23¢ (9.6%), to settle at $2.59 per M British thermal units, the highest front-month finish since Mar 13.
Oil prices end lower, natural-gas futures rally by nearly 10%
This was a wild day for trading stocks. However, in the last 2 hours, Dow rallied more than 300 (1%) to close at its daily high. There will be a lot more talk about the debt ceiling tomorrow & the coming days.Dow Jones Industrials
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