Dow dropped 8 with buying the last hour which trimmed the loss, decliners over advancers 3-2 & NAZ eased back 43. The MLP index inched higher to the 216s & the REIT index slid back fractionally to 367. Junk bond funds slid lower & Treasuries were weak, raising yields. Oil fell to about 70 & gold was flattish at 2020 (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)
The Congressional Budget Office said tax revenues & emergency measures after Jun 15 “will probably allow the government to continue financing operations through at least the end of July.” The updated guidance otherwise reiterated the CBO's earlier uncertainty about the debt ceiling during the first few weeks of Jun. Even though mid-Jun tax revenues could ease pressure on the Treasury thru Jul, there's still the risk of default in the first few weeks of Jun, the key gov forecaster said. “If the debt limit remains unchanged, there is significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations,” said the CBO report. The new report came as the White House & congressional leaders postponed a scheduled Fri meeting to continue negotiations, citing little progress so far over any deal to cut spending z& pair that with a debt limit hike. “The extent to which the Treasury will be able to fund the government’s ongoing operations will remain uncertain throughout May, even if the Treasury ultimately runs out of funds in early June. That uncertainty exists because the timing and amount of revenue collections and outlays over the intervening weeks could differ from CBO’s projections,” added the latest report. The CBO also issued an updated projection of the federal budget deficit for 2023, raising it to $1.5T. The office warned that there was still “a great deal of uncertainty” around the deficit figure, in part due to an expected Supreme Court ruling on Pres Biden's student loan forgiveness plan. Legal experts said the nation's highest court is likely to strike down the $400B debt forgiveness plan, given the court's conservative majority. If that happens, the administration would likely record the money it set aside for the loan forgiveness last year as a reduction in outlays this year, the CBO reported. The CBO is a nonpartisan federal agency that provides objective budget & economic data to Congress, typically to inform legislation. The debt ceiling talks were postponed less than a day before Biden was set to sit down with House Speaker Kevin McCarthy, Senate Minority Leader Mitch McConnell, Senate Majority Leader Chuck Schumer & House Minority Leader Hakeem Jeffries. That meeting was to be the 2nd this week, after a Tues huddle failed to produce any significant developments. It was unclear today what impact, if any, the new report would have on talks currently underway at the staff level, between aides to the 4 congressional leaders & White House liaisons. As both the House & Senate prepared to leave for the weekend on Thurs, McCarthy said he had not seen “a seriousness” from the White House regarding any potential deal. “It seems like they want to default more than they want a deal,” he added. Dems appeared equally dug in, as Schumer indicated in a letter to his caucus today, in which he said staff level talks would continue in the coming days. Central to the partisan impasse is the White House’s insistence that Congress vote to raise the debt limit without preconditions & House Reps' demand that any debt limit hike be paired with sweeping cuts to federal spending & new work requirements for social safety net programs. Failure to raise the debt ceiling before the US runs out of available cash & emergency measures would cause an “economic catastrophe,” Treasury Secretary Janet Yellen said. “That is something that could produce financial chaos, it would drastically reduce the amount of spending and would mean that Social Security recipients and veterans and people counting on money from the government that they’re owed, contractors, we just would not have enough money to pay the bills,” Yellen added
U.S. can avoid default in July if Treasury can make it through cash crunch: CBO
As analysts start to speculate about the Federal Reserve's next rate move as a potential credit crunch looms over markets, one former Fed bank pres advised extreme caution with their decision. "If I were sitting in my old seat at the Dallas Fed, I would not raise rates here at the moment," former Federal Reserve Bank of Dallas Pres Robert Kaplan said. "I would have what I call a hawkish pause. I wouldn't have raised rates in this most recent meeting either." Last week, the Federal Reserve raised its benchmark interest rate by a qtr of a basis point, at 5.00-5.25%, but opened the door to a long-awaited pause in its most aggressive tightening campaign since the 1980s. But for the first time in a year, policymakers signaled that future rate increases are not a given, suggesting that additional policy moves will hinge on "incoming information." "In determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," the Fed said. Kaplan expressed worries that another rate hike would "disproportionately" tighten the vise on small & mid-size banks and businesses. "This last two months hasn't really hurt the finance ability of big companies. It's disproportionately hurt the finance ability of small, mid-size companies," Kaplan explained. "And I would, if I were at the Fed, I'd want to digest this more." The Fed acknowledged that sentiment this week in a new survey which indicated the share of banks tightening terms on commercial & industrial loans for medium & large businesses rose to 46%, up from 44.8% in Q4-2022. "It’s true the Fed is trying to create this tightening and create a slowdown to cool inflation. What I'm worried about is, after we go through this downturn, you need the muscle of small, mid-size banks and the muscle of small, mid-size businesses that rely on those banks to power us out of this downturn. And that muscle is being impaired to some degree right now," Kaplan added.
Former Fed president says he wouldn’t raise rates ‘if I were sitting in my old seat’
Gas prices dipped along with oil prices as the battle over the US debt ceiling triggered fears of a recession, according to the latest data by AAA. The national average price for a gallon of regular gasoline slid down to $3.53 last week. That marks a 4¢ drop from the previous week, AAA reported. The movement comes with a rise in the demand for gasoline & a drop in the price of oil. Gas demand increased from 8.62 to 9.30M barrels a day last week. West Texas Intermediate (WTI), a benchmark for oil prices, decreased by $1.15 to settle at $72.56 upon the closing yesterday's formal trading session. "Oil prices declined yesterday amid ongoing market uncertainty regarding stalled U.S. debt ceiling negotiations," AAA said in its report. "The market is concerned that if the debt limit is breached, it could contribute to the economy tipping into a recession. If a recession occurs, crude demand and prices would likely decline." While average gas prices have declined nationwide, some states saw deeper drops than others.
Gas prices decrease amid market uncertainty: AAA
Gold futures settled lower to tally a modest loss for the week. The price in gold appears to be based on technical levels rather than a tangible change of sentiment. For as long as gold can successfully defend $2000, which was only weeks ago a crucial ceiling of resistance, as support, the outlook for the precious metal remains upbeat. Gold for Jun settled at $2019 an ounce, down chump change for the session, with prices for the most-active contract down nearly 0.3% for the week.
Gold Futures Post a Loss for The Week
Oil futures declined, with US prices losing almost 2% for the week. Besides contending with the prospects of a recession, oil prices were met with a barrage of bearish signals this week: growing US crude inventories, the higher-than-expected US jobless claims, China's still uneven recovery, as well as with the imminent resumption of Iraq's oil exports. Such downcast reminders have offset the boost from incoming OPEC+ supply cuts, along with the prospects of the US soon refilling its strategic reserves. Jun West Texas Intermediate crude fell 83¢ (1.2%) to settle at $70.04 a barrel. Front-month prices declined 1.8% for the week, down a 4th consecutive week.
Oil futures finished lower for the session, with U.S. prices down nearly 2% for the week
This was another sideways week, with Dow down about 375. The economy is drifting lower & feels like it is already in a recession, even it is only a mild one. Unemployment looks to become more of a grim factor going forward.Dow Jones Industrials
No comments:
Post a Comment