Wall Street is ready to move on from worries about a US debt default with the passage of the debt ceiling deal by the Senate last night. The US Senate approved a fiscal deal between the White House and congressional Republicans, ending a political stand-off that risked triggering an unprecedented debt default in the world’s largest economy.

The bill now heads to President Joe Biden’s desk for his signature, just four days before the US Treasury projected it would run out of cash to pay its bills.

Investors will now be turning their attention to the upcoming Federal Reserve meeting on June 13-14 and all the data leading up to it that could influence the central bank's policy decision.

One of the most critical, the May Employment Situation, is out this morning with economists expecting job gains to pull back to around +190,000 versus +253,000 in April. Average hourly earnings in May are expected to rise +0.3 percent on the month for a year-over-year rate of 4.4%. There are worries the numbers may come in higher than expected though, after ADP's private payroll report yesterday showed job growth slowing only modestly to +278,000 in May from a downwardly revised +291,000 in April.

Outside of February 2023 when job growth fell to +165,000, payroll growth hasn't dipped below +200,000 employees in a single month since December of 2020. While job growth is not as blistering hot as the previous two years, unemployment is still at a 50-year low and wage growth continues to trend higher than the Fed is comfortable with.

Overall, bulls and bears alike are still waiting to see their respective bets fully play out. For the bulls, this includes the end of Covid lockdowns in China that were expected to fuel an economic boom. In reality, China saw a short-lived rebound earlier this year but growth has since deteriorated. The Covid rebound in the rest of the world has also begun to fade, something that is only adding to China's growth woes.

Bulls had also been expecting inflation to be on its way out by now, making way for looser monetary policy in the US and other major economies. While US inflation has pulled back a lot, it has nonetheless remained stuck around the same level since the end of last year. With inflation still running more than twice the Federal Reserve's +2% target rate, some bulls are now pushing out their expectation for the Fed to begin rate cuts to early-2024 rather than the second half of 2023.

In the bear camp, some are still waiting for a financial crisis to evolve out of the bank troubles that occurred earlier this year. Even more bears still anticipate a deep economic downturn brought but the long-predicted "recession" has yet to materialize.

In fact, evidence of a major downturn in the US is hard to find in recent data, particularly with the strong labor market.

Looking to next week, it will be a very quiet one as far as new data. Key economic releases includes Factory Orders and the ISM Non-manufacturing Index on Monday; Consumer Credit on Wednesday; and Wholesale Inventories on Thursday. Earnings are very light as well with just J.M. Smucker on Tuesday; Campbell Soup on Wednesday; and NIO on Friday. Have a great weekend!!!

Auto Loan Delinquencies Stacking Up for the Under 30 Owner: Across all ages, the number of new auto loans and leases totaled $162 billion last quarter, down from last year, but an increase from the volume before the pandemic. In the last quarter, 4.6% of borrowers under 30 transitioned into serious delinquency, meaning they were at least 90 days overdue on an auto loan payment. This figure is up from a year ago and is the highest percentage since the tail end of the Great Recession in 2009, when it was 4.7%. Because younger Americans have comparatively fewer savings than older borrowers, they are less prepared to afford the additional costs incurred by the higher rates. Americans are paying around $50 to $60 more per month on new car loans this year because of the higher interest rates alone, according to Ivan Drury, the senior manager of insights at Edmunds. Beyond the payment increase, Drury explained that more car dealers are pushing customers to finance their cars in 36 or 48 months. Source Yahoo Finance

Mortgage Rates Jump to 6.79%, Highest Since November: Mortgage rates soared to their highest level since November, as the markets try to gauge if the Federal Reserve plans another hike in interest rates. The average rate on a 30-year fixed-rate mortgage was 6.79% as of Thursday, according to Freddie Mac ‘s primary mortgage market survey. The gain represents an increase of 0.22 percentage point from the week prior, and is the highest weekly rate since Nov. 10, when the average rate was above 7%. Rates measured by the survey fell as low as 6.09% in February before climbing higher on bank sector uncertainty. “Mortgage rates jumped this week, as a buoyant economy has prompted the market to price-in the likelihood of another Federal Reserve rate hike,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Although there has been a steady flow of purchase demand around rates in the low to mid six percent range, that demand is likely to weaken as rates approach seven percent.” The association’s measure of purchase applications fell a seasonally-adjusted -3% from one week prior, and was -31% lower than a year ago on an unadjusted basis. Source Barrons

International Trade Slowing Rapidly as COVID Recovery Fizzles: The post-pandemic recovery in global trade that spanned the last two years is slowing dramatically, Fitch Ratings said Thursday. The ratings agency expects international trade to grow by +1.9% this year, down from the +5.5% growth rate seen in 2022, and sees world GDP rising by +2%, down from last year's +2.7%. Factors for the trade slowdown include tighter monetary policy, declining fiscal support, and the resurgence of the services sector, which contributes less to trade than the goods sector does. In fact, the volume of the trade in goods is actually falling, with gains in services trade only partially offsetting that dip as tourism and transportation recover, according to Fitch. Meanwhile, supply-chain bottlenecks that held back trade earlier have been largely resolved, while services are becoming less internationally specialized and only account for 22% of all trade. The declining demand for goods has caused industrial production to cool rapidly, Fitch added. The deceleration has become evident in the softer prices of commodities such as copper and falling manufacturing output in China. Source Insider

Layoffs Reach Highest Levels Since 2009: Layoffs have quadrupled since last year, with media and tech suffering the worst blows. Media has had a record number of year-to-date cuts while tech job losses were the highest since 2001, according to a new report from recruiting firm Challenger, Gray & Christmas. Every industry increased layoffs this year, except for education, government, industrial manufacturing, and utilities. Tech led the May surge with over 22,000 layoffs for the month, up 2,939% from the same period last year. The total number of layoffs in May was up 20% from April. Companies overall have eliminated 417,500 jobs since January, the highest five-month total since 2020. Excluding 2020, the start of the pandemic, the year thus far has had the most layoffs since 2009 amid the financial crisis. Plans by companies to hire over the remainder of the year are down from last year as well. The labor market seems to be slowing due to inflation, high interest rates, and fears of recession, as companies announced plans to hire just over 100,000 workers this year, down 83% from what they said in May 2022. This is the lowest level of anticipated hiring in nearly three years, during the pandemic. Source Fortune

Wildfires in Canada Have Already Burned 10 Times More Land Than Usual: Wildfires in Canada have burned an enormous swath of land and forced thousands from their homes, prompting firefighters from across the globe to descend on the country to help douse the flames. The scorched area is 2.7 million hectares (6.7 million acres) in size, or the equivalent of more than 5 million football fields, government officials told reporters Thursday. That’s more than 10 times the average area typically burned by this time of year over the past decade. Fires are raging from west to east coasts — from British Columbia to Nova Scotia — and have prompted about 28,000 Canadians to evacuate. Hundreds of firefighters from the US, Australia and New Zealand have already arrived in Canada to help with the containment effort, while some 200 from South Africa are on their way. Mexican crews will likely soon be enlisted as well, officials said. There have been 1,000 fires so far this year, with about 200 currently active and 82 considered out of control. Source Bloomberg

SpaceX's Starlink Wins Pentagon Contract for Satellite Services to Ukraine: SpaceX's Starlink, the satellite communications service started by billionaire Elon Musk, now has a Department of Defense contract to buy those satellite services for Ukraine, the Pentagon said on Thursday. SpaceX, through private donations and under a separate contract with a U.S. foreign aid agency, has been providing Ukrainians and the country's military with Starlink internet service, a fast-growing network of more than 4,000 satellites in low Earth orbit, since the beginning of the war in 2022. The Pentagon contract is a boon for SpaceX after Musk, the company's CEO, said in October it could not afford to indefinitely fund Starlink in Ukraine, an effort he said cost $20 million a month to maintain. Source Reuters

Fintech Giant "Stripe" is Getting Into the Credit Biz: Stripe wants to make it easier for businesses to access credit. The private financial infrastructure giant announced a new charge card program from Stripe Issuing, its commercial card issuing product. The company originally launched its Issuing product in 2018 and since then, it’s helped companies such as Shopify and Ramp issue more than 100 million cards in the U.S., the United Kingdom and the European Union. The product is today one of Stripe’s fastest-growing, Ho said – supporting half a million transactions a day. Fintechs like Klarna “build entire businesses on it,” the company claims. Previously, Stripe-issued cards could only be used to spend money from a prefunded account. Its expansion into charge cards, according to Denise Ho, head of product for BaaS at Stripe, will give companies the ability to create and distribute virtual or physical charge cards that allow their customers to spend on credit rather than using the funds in their accounts. Source TechCrunch

Arizona Limits Construction Around Phoenix as Its Water Supply Dwindles: Arizona has determined that there is not enough groundwater for all of the future housing construction that has already been approved in the Phoenix area, and will stop developers from building some new subdivisions, a sign of looming trouble in the West and other places where overuse, drought and climate change are straining water supplies. The decision by state officials marks the beginning of the end to the explosive development that has made the Phoenix metropolitan region the fastest growing in the country. The announcement of a groundwater shortage — what the state calls “unmet demand” for water over the next hundred years — means Arizona would no longer give developers in areas of Maricopa County new permits to construct homes that rely on wells for water. Phoenix and nearby large cities, which must obtain separate permission from state officials for their development plans every 10 to 15 years, would also be denied approval for any homes that rely on groundwater beyond what the state has already authorized. Source NYTimes

Most Americans Agree: Family Time is the Most Important Aspect of Life: Americans overwhelmingly view spending time with family as one of the most important things in their life, far outranking other personal priorities, according to a new Pew Research Center survey. About three-quarters of U.S. adults (73%) rate spending time with family as one of the most important things to them personally, regardless of how much time they actually devote to it. Nine-in-ten say they view it either as one of the most important things or as very important but not the most important thing. No more than a third of Americans rate any of the other eight items on the survey as among the most important to them. Clear majorities say being physically active (74%), being outdoors and experiencing nature (72%), and being successful in their career (66%) are at least very important to them. Americans are split on the importance of practicing a religious faith: Half rate it as at least very important to them personally, while 21% say it is somewhat important and around three-in-ten (28%) say it is not important. The survey of 5,079 U.S. adults, conducted from March 27 to April 2, finds that Republicans and Democrats rate many of these aspects of life similarly. Source Pew Research

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