Will The Debt Ceiling Drama Sink The Stock Market Next Week?

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Stocks started the session higher, but quickly reversed course after disappointing consumer sentiment data hit a six-month low of 57.7. Economists polled by Dow Jones had forecasted a reading of 63 for May.

Import prices also climbed 0.4% last month, data from the Bureau of Labor Statistics said Friday. Economists polled by Dow Jones predicted import prices were 0.3% higher in April.

Debt crisis will affect the market next week

The debt ceiling talks were postponed less than a day before Biden was set to sit down with House Speaker Kevin McCarthy, R-Calif., Senate Minority Leader Mitch McConnell, R-Ky., Senate Majority Leader Chuck Schumer, D-N.Y., and House Minority Leader Hakeem Jeffries, D-N.Y.

That meeting was to be the second this week, after a Tuesday huddle failed to produce any significant developments.

It was unclear Friday what impact, if any, the new report would have on talks currently underway at the staff level, between aides to the four congressional leaders and White House liaisons.

As both the House and Senate prepared to leave for the weekend on Thursday, 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,” the California Republican told reporters in the Capitol.

Central to the partisan impasse is the White House’s insistence that Congress vote to raise the debt limit without preconditions, and House Republicans’ demand that any debt limit hike be paired with sweeping cuts to federal spending and new work requirements for social safety net programs.

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Failure to raise the debt ceiling before the U.S. runs out of available cash and emergency measures would cause an “economic catastrophe,” Treasury Secretary Janet Yellen said Monday.

“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 told CNBC’s “Closing Bell: Overtime.”

Weekly option trades summary

All three major indexes closed lower on Friday, with the S&P 500 and Dow Jones Industrial Average notching a second consecutive week of losses.

The Dow Jones Industrial Average dropped 8.89 points lower, or 0.03%, to close at 33,300.62. The Nasdaq Composite fell 0.35%, ending the day at 12,284.74. The S&P 500 slipped 0.16%, closing at 4,124.08.

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