Last Updated 4:05 PM EST
Stock indices finished today’s trading session in the red after debt ceiling talks stalled (see previous update below). As a result, the Nasdaq 100 (NDX), the S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) fell 0.23%, 0.14%, and 0.33%, respectively.
The consumer discretionary sector (XLY) was the session’s laggard, as it fell 0.86%. Conversely, the energy sector (XLE) was the session’s leader, with a gain of 2.19%.
Furthermore, the U.S. 10-Year Treasury yield increased to 3.7%. The Two-Year Treasury yield also increased, as it hovers around 4.3%. This brings the spread between them to -60 basis points.
Compared to yesterday, the market is pricing in a slightly higher chance of a lower Fed Funds rate for December 2023. In fact, the market’s expectations for a rate in the range of 4.25% to 4.5% increased to 17% compared to yesterday’s expectations of 16%.
In addition, the market is now also assigning a 30% probability to a range of 4.75% to 5%. For reference, investors had assigned a 32% chance yesterday.
Last Updated: 12:36PM EST
Stocks remain under pressure so far into today’s trading session as debt ceiling negotiations don’t appear to be going well. Republican negotiators left a meeting with White House officials, according to Bloomberg’s Friday report.
Republican Representative Garret Graves accused White House officials of being “unreasonable,” leading to a temporary halt in debt-limit discussions. These remarks came hot on the heels of House Speaker Kevin McCarthy’s optimism about reaching an agreement as early as this weekend.
Graves expressed to Bloomberg the necessity of productive conversations to move forward, indicating the uncertainty of further negotiation meetings on Friday or over the weekend.
At the time of writing, the Nasdaq 100 (NDX), the S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) are down 0.4%, 0.3%, and 0.5%, respectively.
Last Updated: 11:33AM EST
Stocks are in the red so far in today’s trading session after opening in the green as investors tune in to Jerome Powell’s speech. For the most part, he has stuck to his usual talking points.
Powell reiterated that the banking system is “strong and resilient” and said that the Federal Reserve is strongly committed to bringing inflation down to its 2% target. In addition, he thinks tightening credit conditions from the banking crisis could help tame inflation, meaning that rates may not have to rise as much as expected.
Last Updated: 9:31AM EST
As traders grow optimistic that a deal on the U.S. debt ceiling may close as early as next week, the Nasdaq 100 (NDX), S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) are up by 0.15%, 0.16%, and 0.04%, respectively, at 9:31 a.m. EST, May 19. The three major indexes are on track to finish the trading week in the green and mark one of their best weeks since the end of March 2023.
U.S. Fed Chair Jerome Powell speaks at 11 a.m. today while New York Fed President John Williams remarked earlier that the COVID-19 pandemic-induced inflation posed no evidence that “the era of very low natural interest rates has ended.”
In the meantime, the three-day G-7 meeting in Hiroshima, Japan, commenced today. Sources say that the U.S. is proposing to impose more bans on Russia to limit its capabilities. The Russia-Ukraine war is in its second year, with Russia refusing to stand down. Imposing more bans on Russian exports would help weaken its muscle.
On the earnings front, two important corporate earnings will be released today before the bell, including industrial goods manufacturer Deere (NYSE:DE) and athletic shoemaker Foot Locker (NYSE:FL). The ongoing earnings season has done well in terms of the market’s performance and investor expectations, leaving the murky banking crisis in hindsight.
Meanwhile, traders will try to gauge the economic forecast from speeches by Federal Reserve Chair Jerome Powell and New York Fed President John Williams later in the day today.
Elsewhere, European indices were trading in the green today as traders focused on the development of the U.S. debt ceiling negotiations and the G-7 summit. To demonstrate their support for war-afflicted Ukraine, the U.K. too imposed fresh bans on Russian diamonds, copper, aluminum, and nickel at the G-7 Summit today.
Asia-Pacific Markets Were Mostly Higher
Most Asia-Pacific indices ended the trading session in the green today, owing to optimism on the U.S. debt ceiling limit and the start of the G-7 Summit. Japanese stocks hit their highest levels since 1990 in the wake of the summit.
China’s markets remained under pressure since the relationship between China and Russia remains a hot topic at the G-7 meeting. Hong Kong’s Hang Seng and China’s Shanghai Composite indices ended the trading session down by 1.32% and 0.42%, respectively, while the Shenzhen Component index ended higher by 0.12%.
At the same time, Japan’s Nikkei and Topix indices ended the trading session higher by 0.77% and 0.18%, respectively. Also, Japan’s core inflation data showed growth of 3.4% year-over-year in April.
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