SPX-Hope for a deal on the US debt ceiling...

Article content: SUMMARY-MAIN EVENTS-SCENARIO-SPX LEVELS-AGENDA

After touching a major resistance point, 4200 points, $S&P 500(.SPX)$ fell 0.1% on Friday.

$NASDAQ(.IXIC)$ fell 0.2%, while the $DJIA(.DJI)$ ended the day down 0.3%.

All three major averages ended the week with gains. The S&P 500 rose 1.65% and the Nasdaq Composite 3.04%. This is the best weekly performance since March for both indices. The Dow Jones added 0.38%.

MAIN EVENTS

• The week was mainly animated by the problem of the American debt:

Some of those gains came on Thursday, as traders bet that a US debt ceiling deal could be reached. Comments by House Speaker Kevin McCarthy on Thursday appeared to suggest a potential deal could be reached as early as next week...

However, shares fell on Friday after GOP negotiators walked out of a debt ceiling meeting, with Rep. Garret Graves, R-La., saying the White House team was "unreasonable."

• Powell's contribution:

Default concerns could have been offset by potentially dovish comments from Federal Reserve Chairman Jerome Powell.

Federal Reserve Chairman Jerome Powell said Friday that strains in the banking sector could mean interest rates won't need to be so high to control inflation.

Powell spoke with markets mostly expecting the Fed to take a breather at its June meeting from the series of rate hikes it began in March 2022. However, prices have been volatile as Fed officials weigh the impact this policy has had and will have on inflation, which in the summer of last year hit its highest level in 41 years.

Overall, Powell said inflation was still too high.

MARKET SCENARIO

• Speaking at a conference hosted by the Fed, Powell said the banking problems were likely creating tighter credit conditions. This would give investors hope that the Fed might finally be ready to take its long-awaited pause in interest rate hikes...

Sure enough, traders quickly reassessed their thinking for the next Fed meeting on June 13-14. Fed futures now show an 81% chance of a break after the June meeting, down from 64% a day ago.

• The odds of a rate hike will be even lower if President Joe Biden and House Republicans fail to reach an agreement on raising the debt ceiling...

Treasury Secretary Janet Yellen has repeatedly said June 1 is the date the federal government will exhaust measures to avoid default without raising the debt ceiling. It's now in 13 days...

• On the earnings front, of those companies, 107 cited the term "recession" in their first-quarter earnings call. This number is well above the 5-year average of 77 and the 10-year average of 59.

FactSet source

• Meanwhile, the bond market continues to send a more pessimistic signal. Treasury yields are at one-month highs and rising. The yield on the 2-year U.S. Treasury note has increased for five-straight trading days...

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SPX LEVELS

• Key levels: 4000-4100-4150-4200

• Upper levels: 4200-4225-4225 (4200 1st resistance)

• Lower levels: 4175-4150-4125-4100-4000 (4175 11th support)

SPX-Levels

AGENDA

• Manufacturing PMI and Services PMI - Germany, UK and US on Tuesday.

• Wednesday, UK, annual inflation and two speeches by Bank of England President Bailey. Investors will also be watching Germany's Ifo business climate index and the FOMC meeting minutes.

• Thursday, quarterly GDP and unemployment registration in the United States

• Friday core PCE .

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@TigerStars @CaptainTiger