Wall Street bulls are becoming much more optimistic about a resolution in Washington regarding the debt ceiling. This helps lift one of the dark clouds that has been hanging over our head.

On the flip side, bears are pointing to a less optimistic view about China's recovery and a bit more worried that the Fed is going to stay more hawkish than some might have anticipated. Investors are again heavily debating the Federal Reserve's next move as more officials raise doubts about a "pause" in June. Dallas Fed President Lorie Logan and St. Louis Fed President James Bullard yesterday both said they did not think inflation was coming down fast enough to justify pausing the Fed's rate hiking campaign, echoing sentiments expressed by several other colleagues this week.

Bullard actually said that the slow pace of decline "may warrant taking out some insurance by raising rates somewhat more to make sure that we really do get inflation under control." Still, a majority of Fed officials that weighed in this week have endorsed pausing rate hikes at the June 13-14 meeting, with many of them noting the risk of raising rates too much too fast.

That has also been a key concern on Wall Street, particularly amid tightening credit conditions stemming from the banking turmoil that began in March.

Both the Fed's tightening tools and tighter bank lending impact the economy with a pretty long lag of anywhere from 3 to 6 months, or more. Many Wall Street economists argue that the greater risk now is not rising inflation but rather a severe credit crunch that could grind economic growth to a halt and possibly usher in a severe recession.

Investors are highly anxious to hear the thoughts of Fed Chair Jerome Powell today, who has previously stated his belief that tighter bank lending will likely cool the economy and help slow inflation back to the Fed's +2% target.

The next critical inflation update will be the PCE Prices Index next Friday. The headline rate for March slowed down to +4.2% from +5.1% previously. However, the Fed's preferred "core" rate, which strips out energy and food, held fairly steady at +4.6% versus +4.7% in February. That's also exactly where the gauge stood in December, meaning it could be argued that the Fed's moves have had little impact on inflation this year outside of keeping it level.

There is no significant economic data due today and the calendar for next week is fairly light. Aside from PCE Prices on Friday, investors will be digesting New Home Sales on Tuesday; the second read on Q1 GDP and Pending Home Sales on Thursday; and Durable Goods Orders and Consumer Sentiment on Friday.

On the earnings front, the highlight today is Deere and Co. Next week brings several more key results with the biggest highlight being NVIDIA on Wednesday. Other releases include Zoom on Monday; Auto Zone, BJ's Wholesale Club, Intuit, Lowe's, and Palo Alto Networks on Tuesday; Analog Devices and Snowflake on Wednesday; and Best Buy, Burlington Stores, Costco, Deckers Outdoor, Dollar Tree, Medtronic, and VMware on Thursday.

Investors next week will also be hoping for a resolution to the debt ceiling standoff in Washington ahead of the approximate June 1 deadline to avoid a possible US debt default. House Speaker Kevin McCarthy yesterday said he hopes to hold the first vote in his chamber next week... stay tuned,

Amazon Paying Some Customers to Pick Up Their Packages: Amazon’s push to cut its delivery costs could mean more money in the pockets of its customers. The online retail giant is offering select Prime customers $10 to pick up a purchase, rather than have it shipped to their home, Reuters reports. Customers who place an order of $25 or more will receive the incentive if they opt to pick it up at a nearby Kohl’s, Whole Foods or Amazon Fresh store. At the moment, it’s unclear if the money is a rebate for their order or an Amazon credit. The move comes as Amazon has been going through a round of belt-tightening in recent months. After laying off 18,000 employees in January, it cut another 9,000 jobs in late March. The company that rose to prominence on fast, free shipping has struggled as it has transitioned to its own fleet of vehicles, which has increased its costs. And attempts to get a drone shipping program up and running have suffered repeated setbacks Source Yahoofinance

Iconic "MTV News" Shutting Down After 36 Years: After decades of reporting on entertainment news and hosting historic interviews with A-listers in the music industry, MTV News is shutting down. MTV News began gaining popularity among American youth in the late 1980s, led by Rolling Stone editor-turned-TV host Kurt Loder, who served as the first correspondent of the network's "The Week in Rock" program, covering entertainment and pop culture news and interviewing musicians like Madonna and Prince. A lot of great memories growing up watching all of MTV's programming, but like everything in life, it eventually goes out of style! Source Business Insider

Where Home Prices are Falling the Most: Existing home prices in April saw the steepest annual decline since 2012. And sales dropped as prospective buyers and sellers adjusted to a very different spring homebuying season. Existing homes in April were sold at a seasonally-adjusted annual rate of 4.28 million, the National Association of Realtors said Thursday. The rate represents a -3.4% drop from March and is slightly lower than the 4.30 million economists had expected, according to FactSet consensus estimates. Sales fell in all four regions of the nation, but the drop was most pronounced in the west and south, where sales declined -6.1% and -3.4%, respectively. The median home in April sold for $388,800, -1.7% lower than a year ago and the sharpest fall since January 2012. But the national price trend doesn’t show the whole story: Median price declines were greatest in the western U.S., dropping -8% from one year prior. Home prices fell a more modest -0.6% in the south, and grew in the northeast and Midwest, gaining +2.8% and +1.8% respectively. The trade group expects national median home price drops to return to gains later this year, according to its May economic outlook, which anticipates a year-over-year gain of 0.1% in the median sale price in the fourth quarter and 0.6% in the first quarter of 2024. Source Barrons

How Will Montana Enforce the Country's First TikTok Ban? Montana Gov. Greg Gianforte on Wednesday signed into law a first-of-its kind bill that makes it illegal for TikTok to operate in the state, setting up a potential legal fight with the company amid a litany of questions over whether the state can even enforce the law. The new rules in Montana will have more far-reaching effects than TikTok bans already in place on government-issued devices in nearly half the states and the U.S. federal government. There are 200,000 TikTok users in Montana as well as 6,000 businesses that use the video-sharing platform. Proponents of the law in Montana claim the Chinese government could harvest U.S. user data from TikTok and use the platform to push pro-Beijing misinformation or messages to the public. The law will prohibit downloads of TikTok in the state and fine any “entity” — an app store or TikTok — $10,000 per day for each time someone accesses TikTok, “is offered the ability” to access it, or downloads it. That means Apple and Google, which operate app stores on Apple and Android devices, would be liable for any violations. Penalties would not apply to users. Source Associated Press

Fastest Rising Costs for Older Americans: Higher prices have made it difficult for Social Security beneficiaries to keep up, even with a record boost to benefits for 2023. An +8.7% cost-of-living adjustment, or COLA, put about +$140 per month more in Social Security beneficiaries’ checks starting in January, according to estimates from the Social Security Administration. Yet rising costs means beneficiaries have lost -36% of their buying power since 2000, according to new research from The Senior Citizens League, a nonpartisan senior group. To be able to live as well on Social Security benefits as in 2000, today’s retirees would need an extra $516.70 per month, the nonpartisan senior group found. Social Security COLAs have increased by +78% since 2000, according to The Senior Citizens League. At the same time, the cost of goods and services retirees typically buy has gone up by +141.4% over that time. COLAs have averaged +3.4% annually since 2000, while goods and services have averaged about +6.2%. This year’s loss in buying power — measured from January 2000 through February 2023 — improved from a -40% decline based on last year’s study. Yet the current -36% loss in buying power is still one of the deepest losses recorded, according to the group. Source CNBC

The Disappearing White-Collar Job: The jobs lost in a months long cascade of white-collar layoffs triggered by over hiring and rising interest rates might never return, corporate executives and economists say. Companies are rethinking the value of many white-collar roles, in what some experts anticipate will be a permanent shift in labor demand that will disrupt the work life of millions of Americans whose jobs will be lost, diminished or revamped partly through the use of artificial intelligence. “We may be at the peak of the need for knowledge workers,” said Atif Rafiq, a former chief digital officer at McDonald’s and Volvo. “We just need fewer people to do the same thing.” For the year ended in March, the number of unemployed white-collar workers rose by roughly 150,000, according to an analysis from Employ America, a nonpartisan research group. The underlying dynamic has been accelerated by the binge hiring of recent years. Company leaders say they have become saddled with bloated managerial layers that slow decision making. In previous downturns, executives pledged to make streamlining efforts stick, only to replenish or grow their corporate ranks when business conditions improved. Many executives say the forces now at play suggest this time is different. Source WSJ

Corporate Bankruptcies on Track to Be Biggest in Over a Decade: More than 230 American companies have filed for bankruptcy through April, according to S&P Global, the highest level over the first four months of any year since 2010. That number — which counts public companies with at least $2 million in assets or liabilities and private companies with $10 million in publicly traded debt — doesn’t include more recent cases, like Vice Media, Cox Operating and the K.K.R.-backed Envision Healthcare. Blame a slowing economy, fast-rising interest rates and persistent inflation, all of which have whacked companies struggling under heavy debt burdens and challenged business strategies. Among the more vulnerable? Companies taken over by private equity firms and loaded up with debt. Lifelines like rock-bottom interest rates and pandemic-related government aid have also largely disappeared. Struggling companies began laying off workers a year ago in an effort to reduce costs. But they are now “running out of time,” S&P analysts wrote in a research note. “Firms that were struggling well before the pandemic and the end of ultra-low interest rates have now gone to their breaking point.” Source DealBook

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