Debt Ceiling Moves | May 19, 2023

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS:   S&P 500, NASDAQ, Debt Ceiling

Markets gained on debt ceiling hopes last week. Is the worst behind us or should we expect more moves?

Monday                                      S&P 500 0.30% | NASDAQ 0.66%

Debt ceiling negotiations took center stage. It resulted in a positive market as hope seems to be there on a deal getting done. The long-held belief that a market swoon would be necessary to move politicians closer is not happening. This causes concern that urgency may not be felt, but it appears it may not be needed.

Tuesday                               S&P 500 0.64% | NASDAQ 0.18%

Home Depot revenue missed estimates and they are forecasting slower consumer spending. Home Depot is one of a handful of companies that are a ‘bell weather’ for the health of the consumer. Weaker demand is a poor signal for expected economic output…

Wednesday                         S&P 500 1.19% | NASDAQ 1.28%

The morning started slowly but shifted into high gear around midmorning. They climbed following a press conference regarding the debt ceiling as it appeared that substantial progress was being made. The debt ceiling continues to take center stage.

Thursday                             S&P 500 0.94% | NASDAQ 1.51%

Markets continued the rally from Wednesday. It came on continued hope of a debt ceiling deal. Initial jobless claims came in lower which signals a continued tight job market. The negative that flew under the radar was that Walmart improved their forecast for 2023. While this sounds good it could signal a weaker consumer throughout the rest of the retail economy.

Friday                                           S&P 500 0.14% | NASDAQ 0.24%

Stress in the banking sector may actually hold rates where they are according to FRB Chair Powell. That did not help bank stocks. Neither did the fact that debt ceiling talks broke down on Friday.

Conclusion                           S&P 500 1.65% | NASDAQ 3.04%

The debt ceiling has grasped the attention of the market throughout the week. The traditional thought to the last sentence would be that markets fell. To the contrary, we saw substantial growth. I did not say healthy growth as +1% swing in the market signals more volatility ahead rather than healthy growth. Expect that the next two weeks will be fraught with volatility as we draw closer to the debt ceiling deadline.

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