Dow slid back 32, decliners over advancers 3-2 & NAZ was off 65. The MLP index was steady in the 215s & the REIT index fell 2+ to the 367s. Junk bond funds fluctuated & Treasuries had only limited purchases (more below). Oil pulled back 1 to the 72s & gold was flattish at 2032.
AMJ (Alerian MLP Index tracking fund)
Pres Biden will meet with congressional leaders today as the guys in DC scrambles to lift the debt ceiling with less than a month before the federal gov is set to run out of money. Biden last met with House Speaker Kevin McCarthy, the Rep whose support he will need to hike the borrowing limit in the House in Feb. The stakes now are far higher than they were during their last huddle. This time, the other 3 top congressional leaders will attend: Senate Majority Leader Chuck Schume; Senate Minority Leader Mitch McConnell & House Minority Leader Hakeem Jeffries. Lifting the debt ceiling is necessary for the gov to cover spending commitments already approved by Congress & the pres to 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. The White House has stressed that while it is open to discuss spending cuts, it will not negotiate with Reps on the debt ceiling. The Biden administration has said the GOP has a constitutional responsibility to raise the borrowing limit. “Those two are totally unrelated. Whether you pay the debt or not, doesn’t have a damn thing to do with what your budget is,” Biden said Fri. “They’re two separate issues — two. Let’s get it straight.” The Treasury Dept has started to take extraordinary steps to keep paying the gov's bills, & expects to be able to avoid a first-e warned yesterday that failure to hike the debt ceiling would cause an “economic catastrophe.” Defaulting on sovereign debt would wreak havoc on the economy & roil markets around the world. A Moody's report last year said a default on Treasury bonds could throw the US economy into a tailspin as bad as the last recession.
Here’s what the looming debt ceiling crisis means for your portfolio
A Gallup poll found that just 35% of Americans have a "great deal" or "fair amount" of confidence in Pres Biden to do or recommend the right thing for the economy. That is the lowest confidence rating for a president since George W Bush occupied the Oval Office in 2008, at the height of the global financial crisis. About 48% said they have almost no confidence in Biden when it comes to the economy. Approval ratings also plummeted for Jerome Powell as he leads the central bank in its fight to crush runaway inflation with the most aggressive interest-rate hike campaign since the 1980s. Just 36% of US adults said they have a "great deal" or "fair amount" of confidence in Powell on the economy, matching the lowest level of public confidence for a Fed chair on record. About 28% of respondents said they have almost no confidence in Powell. Confidence in Fed chairs typically tracks the health of the economy. In Apr 2020, after the COVID-19 lockdowns, Powell's approval rating stood at 58%. The central bank has sharply raised interest rates over the past year from near-zero to above 5%, the highest since 2007. While the rate increases are intended to cool inflation, which remains abnormally high, they also risk slowing hiring & sending the economy into a recession. Powell has remained optimistic that the economy may avoid a recession & a spike in unemployment, despite the 10 consecutive rate hikes. "There are no promises in this. But it just seems to me that it's possible that we can continue to have a cooling in the labor market without having the big increases in unemployment that have gone with many, you know, prior episodes," Powell told reporters last week. "Now, that would be against history. I fully appreciate that." "None of these leaders engenders much confidence now, and Americans have similarly low confidence levels in each," said Jeffrey Jones, Gallup's senior editor. "In fact, many are at or near low points in the two-decade history of Gallup’s trend."
Americans lack confidence in Biden, Powell, Yellen on the economy, Gallup poll shows
Treasury yields fell as investors looked to comments from Federal Reserve speakers & inflation data that could provide hints about the outlook for the economy & monetary policy. The yield on the 10-year Treasury fell to 3.503% & the 2-year Treasury yield was last trading about 1 basis point lower at 4.005%. Yields & prices have an inverted relationship. One basis point equals 0.01%. Investors are also bracing themselves for the latest consumer & producer price index reports, which are due on tomorrow & Thurs, respectively. According to a survey, economists are expecting Apr's CPI data to reflect a 0.4% increase on a month-over-month basis & 5% on a year-over-year basis. The data could provide fresh hints about the Fed's next policy moves, especially regarding interest rates, which Fed Chairc Jerome Powell said last week would be data-dependent.
Treasury yields dip as investors await Fed speaker remarks, inflation data
The stock market is very unsettled & Dow has been flattish for about 3 months. The gloomy Gallop pole & talks to raise the debt ceiling are 2 more negative factors keeping investors on the sidelines.
Dow Jones Industrials
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