With the end of another earnings season in sight, Wall Street’s attention has turned to Washington and the debt ceiling deadline. Republican negotiators on Friday walked out of talks on raising the debt limit , abruptly ending a positive week of discussions that appeared to be leading toward a deal. Democrats and the White House have been pushing for a “clean” hike to the debt limit that would push the next deadline past the 2024 presidential election, while Republicans are pressing for spending cuts. There has been an increased sense of urgency since May 6, when Treasury Secretary Janet Yellen said the United States could run out of money to pay its debts as soon as June 1, much earlier than expected. Many investors believe this ongoing game of chicken over the debt limit is largely for show, since the U.S. has never defaulted on its debt obligations. A failure to raise the limit before June 1 could lead to a downgrade of U.S. debt by credit rating agencies, higher borrowing costs, lower consumer and investor sentiment and a crash landing into recession. We hope to see the two sides coming together on a deal in the coming days, and provided additional thoughts on the ongoing debate during Friday’s Homestretch . Meanwhile, 95% of the S & P 500 has now reported quarterly earnings results. More than 75% of those companies reported better-than-expected revenue results, while 78% posted better-than-expected earnings, according to FactSet. And let’s not forget about inflation. Several key macroeconomic updates, including the second reading on first-quarter GDP on Thursday and the personal spending and income report on Friday will provide more clues to how the Federal Reserve’s battle with inflation is going. The spending report includes the core PCE price index, the central bank’s favorite measure for inflation. That report could change perceptions on the Fed’s next moves. Investors are currently pricing in little likelihood that we see another rate hike this cycle,…
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