Attention Turns to the Debt Ceiling – Weekly Update

May 15, 2023 | By Steven DiGregorio

Stocks were mixed last week as good inflation news was offset by mounting debt ceiling concerns and rekindled regional banking fears.

The Dow Jones Industrial Average lost 1.11%, while the Standard & Poor’s 500 slipped 0.29%. The Nasdaq Composite index rose 0.40% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 0.67%.1,2,3

Uncertainty Weighs on Stocks

The week got off to a quiet start as investors waited on April’s two key inflation reports scheduled for release on Wednesday and Thursday. When consumer prices rose less than forecasted, stocks broke out of their lethargy and moved higher. Stocks also got a boost on Wednesday afternoon from comments from the White House, hinting at an opening for negotiation on the debt ceiling.

Despite a substantial cooling in producer price increases, stocks turned mixed on Thursday amid a disappointing earnings report from a Dow Industrial component and new data that reignited investor anxiety over regional banks’ financial health. Stocks ended the week the way they began, largely drifting in an otherwise directionless fashion.

Inflation Pressures Ease

Consumer prices rose 4.9% year-over-year, the tenth consecutive month that the headline inflation rate has declined. This was a slight improvement over March’s 12-month increase of 5.0%. April’s monthly inflation rate was 0.4 percent, above March’s 0.1 percent rise. April’s increase was driven by higher housing, gasoline, and used car costs.4

Inflation progress extended into wholesale prices, which rose 0.2% in April–below the consensus forecast of a 0.3% rise. For the last twelve months, producer prices increased 2.3%, an improvement from last month’s 2.7% year-over-year gain and the lowest recording since January 2021.5

This Week: Key Economic Data

Tuesday: Retail Sales. Industrial Production.
Wednesday: Housing Starts.
Thursday: Existing Home Sales. Index of Leading Economic Indicators. Jobless Claims.

Source: Econoday, May 12, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

This Week: Companies Reporting Earnings

Tuesday: The Home Depot, Inc. (HD).
Wednesday: Cisco Systems, Inc. (CSCO), Target Corporation (TGT), The TJX Companies, Inc. (TJX).
Thursday: Walmart, Inc. (WMT), Applied Materials, Inc. (AMAT), Ross Stores, Inc. (ROST).
Friday: Deere & Company (DE)

Source: Zacks, May 12, 2023
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

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Footnotes and Sources

1. The Wall Street Journal, May 12, 2023
2. The Wall Street Journal, May 12, 2023
3. The Wall Street Journal, May 12, 2023
4. The Wall Street Journal, May 10, 2023
5.  CNBC, May 11, 2023


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Tags: Debt Ceiling, DJIA, Easing Inflation, NASDAQ, Regional Banks, S&P 500

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STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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