Stocks rallied Friday on rising optimism that D.C. lawmakers will reach a deal to raise the U.S. debt ceiling, led by the tech-heavy Nasdaq, which closed at its highest level since August.
Two-year U.S. Treasury yields rose for an 11th straight session after the latest government data showed inflation picking up more than expected, and Federal Reserve Bank President Loretta Mester said she would not rule out another rate hike next month.
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Debt talks are still ongoing, but appear to be nearing the end amid reports that a potential deal would raise the government's $31.4T debt ceiling as widely expected and limit spending on most items for two years. Republican negotiators have reportedly agreed for a smaller 3% increase in defense spending. Non-defense discretionary spending is expected to be maintained at current levels.
The White House is said to be mulling scaling back on increased funding for the IRS, cutting $10B from an $80B budget increase for the agency that was planned under the Inflation Reduction Act to target wealthy individuals.
As both sides struggle to come to a deal, Treasury Secretary Janet Yellen yesterday moved the so-called X-date by a few days. She now estimates that the Treasury will run out of options for paying the government's obligations by June 5.
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Investors digested new inflation data on Friday. Government statistics showed that the PCE price index, a favorite measure for the Federal Reserve, rose 0.4% in April compared to the previous month, higher than economists had projected.
On a year-over-year basis, the PCE price index climbed 4.4%.The same report showed that personal income rose 0.4% compared to the previous month, while spending rose 0.8%. Yet the rally in stocks was undeterred, with investors eager to add to positions ahead of the Memorial Day holiday weekend.
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For the full week, the Dow Jones index lost 1%, but the S&P 500 edged up 0.3% and the Nasdaq jumped 2.5% for a fifth straight week of gains.
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Comments
Debt ceiling is becoming a "sell the news" event ! Delaying to June 5 makes it even more so ! QQQ $360 is absolute max, if it gets there ! Sell ! Sell !! Sell !!!
XLK beat QQQ with YTD return of 32.42%. AAPL & MSFT are the largest holdings in XLK. Semiconductors, Software, Cloud & Ai being the other prominent sub sectors...XLK is a safer & better bet than QQQ
CME fedwatch showing a 65% chance for a 25pt basis hike in June. This is up from virtually zero just a couple of weeks ago. This market is pricing in cuts. Why isn't anyone talking about this?
QQQ rocks and will still rock long after inflation worries, debt defaults, overseas wars and all the other things that make up the current wall of worry are gone and buried.
Looks like to me a large Fibonacci retracement is on the way this week.