Debt Ceiling Talks to Move S&P 500 This Week
May 22 2023 - 7:54AM
Finscreener.org
Stocks declined on Friday as GOP
negotiators abruptly paused ongoing debt ceiling discussions,
raising concerns about the likelihood of a timely agreement.
Despite this setback, the S&P 500 recorded its strongest
weekly performance since March.
The
Dow Jones Industrial Average fell 109.28 points, or 0.33%, closing at
33,426.63. The
S&P 500 slipped
0.14% to 4,191.98, while the Nasdaq Composite declined 0.24% to
12,657.90.
However, all three major indices
still posted weekly gains. The S&P 500 rose by 1.65%, and
the Nasdaq Composite experienced a 3.04% increase, marking their best
weekly performances since March. The Dow saw a modest gain of
0.38%.
Investors had shown optimism on
Thursday, anticipating a possible resolution to the U.S. debt
ceiling issue. House Speaker Kevin McCarthyU+02019s remarks fueled
hopes of a forthcoming agreement, possibly as early as next
week.
Nonetheless, market sentiment
soured on Friday after GOP negotiators withdrew from the debt
ceiling meeting. Representative Garret Graves criticized the White
House team, deeming them "unreasonable" and stating that further
discussions would be futile.
Is a Fed pivot likely in 2023?
On Friday, Federal Reserve Chair
Jerome Powell stated that stress within the banking sector could
alleviate the need for higher interest rates to control inflation.
During a monetary conference in Washington, D.C., Powell
highlighted the effectiveness of Fed initiatives in addressing
issues at mid-sized banks, which have mitigated potential
worst-case scenarios.
However, he acknowledged that
challenges persist at Silicon Valley Bank and other institutions,
which could impact the broader economy. Powell noted that while
these developments contribute to tighter credit conditions and
potentially hinder economic growth, employment, and inflation, they
may reduce the need for a significant policy rate
increase.
He emphasized the uncertainty
surrounding the extent of this impact. Despite market expectations
of a pause in rate hikes, Powell indicated that inflation remains
too high, with Fed officials assessing the implications of their
policies on inflation levels.
Retail earnings and inflation
Next week, we can expect earnings
reports from various retail companies, shedding light on consumer
spending during the first quarter. Notable companies include
LoweU+02019s (NYSE:
LOW), DickU+02019s Sporting
Goods (NYSE:
DKS), Costco (NASDAQ:
COST), Dollar Tree
(NASDAQ:
DLTR), and The Gap
(NYSE: GPS).
Research from FactSet reveals
that fewer S&P 500 companies are discussing the possibility
of a recession, indicating reduced concerns compared to the
previous three quarters. For example, among the companies reporting earnings,
only 107 mentioned the term "recession" in their calls, down from a
peak of 238 in Q2 2021.
The Bureau of Economic Analysis
will release the latest Personal Consumption Expenditures (PCE)
Price Index, the Federal ReserveU+02019s preferred inflation gauge.
It is expected that the index rose 0.2% last month, with annual
prices increasing by 4.1%.
Also, housing market updates will
include new and pending home sales for April. New home sales are
projected to total 660,000, while pending home sales fell 5.2% in
March, indicating ongoing pressure on the U.S. housing market
despite stabilized mortgage rates and a modest rebound in home
prices.
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