THE GIST (“THE WHAT”)
The ongoing debt ceiling drama keeps the markets on the edge. Hawkish comments by Minneapolis Fed President Kashkari that interest rates could keep going higher for longer if inflation becomes more entrenched further dampened sentiment. Trading within a tight range during most part of the early trading session, the S&P 500 index pulled back in the afternoon to close near day’s low at 4145.57, down 47.05 points (-1.12%).
Note: Our daily “S&P 500 Trading plan” will be posted around 9:30/10:00am EDT, every trading day.
Debt Ceiling Deadline Likely to Whipsaw the Markets
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THE DETAILS (The “How & Why”):
As the debt ceiling talks between President Biden and House Speaker McCarthy drags on, markets seem to be in a holding position waiting for a resolution to raise the $31.4 trillion debt ceiling, failure of which could trigger a disastrous government default. Volatility in bond yields also jumped with the 10-year Treasury yield jumping to a 2-month high at 3.757% but settling lower for the day by 1.5 basis points at 3.70%.
On the earnings front, Zoom Video Communications slipped 8.07% despite beating earnings estimates but reporting a decline in its enterprise business. AutoZone was another major decliner, falling 5.97% after the automotive replacement parts maker missed estimates of net sales and same-store sales for the current quarter.
Bucking the trend, however, Moderna led the index gainers, rallying 8% amid reports that the Biden administration will be pushing to preserve the drug maker’s Covid vaccine program during the debt talks. Regional banks also extended their previous session’s strong gains, led by a 7% jump in PacWest Corp after the troubled lender announced a sale of its real estate construction loans portfolio worth $2.6 billion in an attempt to shore up its liquidity.