Investors are hoping to see some progress on a US debt ceiling deal with Congressional party leaders and President Biden set to resume talks today. Treasury Secretary Janet Yellen estimated that the US will run out of cash to pay its bills around June 1, meaning lawmakers have just over 2 weeks to work out a compromise.

Investors are also anxious to hear from several Fed officials today including Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic, two of the most hawkish officials. Bostic actually participated in a panel discussion yesterday where he warned that the central bank is unlikely to cut rates in 2023. In fact, Bostic said he is more biased toward the next Fed rate move being up rather than down, pointing to still-strong consumer spending and the tight labor market which suggest ongoing upward price pressure. At the same time, Bostic says he was "inclined" to pause rates at this point to see how tighter credit conditions are impacting the economy.

Investors today are anxious to see April Retail Sales, which took a pretty steep -1% dive in March and helped fan "recession" worries. Economists expect a rebound to +0.7% for April which could help calm fears about the economy grinding slower. However, too strong a gain could reignite inflation fears and weigh on the bulls' hopes for a less aggressive Fed ahead.

One big question that no one seems able to answer is, at what point do US consumers start to crumble under the high-price environment? Data from the New York Federal Reserve yesterday indicates that US consumers may be increasingly relying on debt, with a growing number getting overextended. As of the end of Q1 2023, US consumer debt reached a record $17.05 trillion, nearly +$3 trillion higher than before the Covid pandemic. That includes $986 billion in credit card debt, which was basically unchanged from Q4 2022.

Economists say that is worrisome because credit card debt typically declines from the 4th to 1st quarters as consumers pay down holiday balances. This is the first time in 20 years that the pattern has been broken. And while delinquency rates do remain historically low, the report notes that the share of loans at least 30 days overdue is rising across most loan types.

Wall Street will also be looking more insights on the state of US consumers from Home Depot earnings today.

To this point, big tech stocks such as Nvidia, Meta, Tesla, Apple, Amazon, Microsoft, and Alphabet have been doing most all of the heavy lifting and continue to carry the S&P 500. In simple terms, these seven stocks mostly account for all of the gains in the stock index this year.

Bears continue to say that a major recession is right around the next corner and that corporate earnings are going to dramatically decline causing the entire market to pull back.

Bulls are saying a slowing economy or a recession will bring with it sizable rate cuts by the Fed and a more lean corporate balance sheet, meaning the market will anticipate this and stock prices will move higher.

Apple is Now Worth More Than the Entire Russell 2000: The market capitalization of Apple Inc. has surpassed that of the entire Russell 2000 for two weeks, the longest stretch on record, according to Bloomberg data. Apple’s market capitalization, which measures how much the company is worth based on the value of all its outstanding stock, surpassed that of the Russell 2000 on April 27 and has held higher through Monday. The only other time that occurred was Sept. 1, 2020, when Apple’s valuation passed that of the small-cap index for only a day. With a market capitalization of roughly $2.7 trillion, Apple is now worth roughly $100 billion more than the combined value of all 2,000 stocks in the Russell 2000, according to Bloomberg data. Both the S&P 500, which has risen more than 7% year-to-date, and the Nasdaq Composite, which has risen nearly 18%, owe the bulk of their gains to a handful of megacap technology stocks including Apple, Microsoft, Alphabet, and Nvidia. The top 10 stocks in the S&P 500 hold a 29% weight in the index, and have been responsible for around 70% of its year-to-date performance gains. Source MarketWatch

A Few of Buffett's Q1 Stock Moves: Warren Buffett’s Berkshire Hathaway placed a $954 million dollar bet on credit card and banking company Capital One in the first quarter, one of the few new stakes added by the investment group in a period when it was dumping billions of dollars worth of stocks. The regulatory disclosure on Monday also showed Berkshire exited its positions in US Bancorp and Bank of New York Mellon in the first quarter. Berkshire also disclosed it had cut its stake in oil major Chevron by about a fifth, selling roughly 35mn shares between its own accounts and an investment portfolio managed by a subsidiary. The company exited its remaining position in chipmaker Taiwan Semiconductor Manufacturing, with Buffett hinting at the geopolitical tension between Taiwan and China for the share sales this year and last year. Source Financial Times

Gas Prices Have Dropped -30% During the Past Year: It was nearly one year ago when gasoline crossed a threshold American drivers had never seen before, $5 a gallon and now we're back to around $3.50. A slump in the price of crude oil which accounts for roughly half the price of a gallon of gas, over the last year has helped pull down prices for the fuel. A barrel of West Texas Intermediate crude, the U.S. benchmark is around $70, down by a third over the last 12 months. With gas prices being down by about 30% since last June, we'd expect to see an improved mood of the American consumer but the latest readings on consumer sentiment show there's still plenty of sourness in supply. One key reading shows consumer sentiment falling to a six-month low. Source Axios

Argentina Hiking Rates to 97% - Argentina's central bank will reportedly hike rates 600 basis points to 97% as it continues to fight inflation, which hit 109% annually during April. Additionally, a tumbling domestic currency and diminishing foreign currency reserves threaten the country’s government finances and operations. More measures are expected to be announced in the coming days, including further central bank forex intervention and additional funds from the International Monetary Fund (IMF), among other actions. Source Reuters

U.S. to Buy 3 Million Barrels to Refill Emergency Oil Reserve: The U.S. Department of Energy said on Monday it will purchase 3 million barrels of crude oil for the Strategic Petroleum Reserve for delivery in August, and asked that offers be submitted by May 31. U.S. Energy Secretary Jennifer Granholm had signaled to lawmakers late last week that her department could start repurchasing oil for the stockpile soon, after a record sale last year during a spike in prices that pushed the level of the reserve to the lowest since 1983. The Biden administration last year conducted the largest ever sale from the SPR of 180 million barrels, part of a strategy to stabilize soaring oil markets and combat high pump prices in the aftermath of Russia's invasion of Ukraine. The sales brought the SPR inventory to around 372 million barrels, the lowest since 1983, amounting to just under 20 days of cover at current U.S. consumption rates. The administration has said it would start to buy oil back into the reserve when prices are consistently at or below $67 to $72 per barrel, well-below the level at which the oil had been sold, so that taxpayers can get some benefit. U.S. crude prices were around $71 a barrel on Monday

Source Reuters

Household Debt Rises Past $17 Trillion for First Time: Household debt increased by $148 billion (0.9%) to $17.05 trillion in Q1 2023. Mortgage balances climbed the highest to $12.04 trillion while auto loan and student loan balances increased to $1.56 trillion and $1.60 trillion, respectively. Credit card balances remained flat at $986 billion. When adjusting for inflation, the household debt balance drops just below the $17.91T peak in January 2009. Student loans, which were on the rise for many years, have been flattening out over the last few years in large part because of the student loan pause that began at the start of the COVID pandemic. The current spread between student loans and auto loans is at $4.2 billion, the smallest spread since 2009 when the student loan debt balance overtook the auto loan debt balance. The overall delinquency rate remained low by historical levels, at 2.6%. But the share of debt that became delinquent — meaning it was at least 30 days late — is rising for most loan types, including credit cards and auto debt. Source Advisor Perspective

Mexico to File USMCA Complaint Over Texas Cargo Inspections: Mexico's economy ministry is urging the U.S. state of Texas to remove inspections of cargo crossing the border, which it said in a statement on Monday is causing millions of dollars in losses for U.S. and Mexican firms. The Mexican government will file a complaint with the trade facilitation committee under the United States-Mexico-Canada (USMCA) free trade agreement, which came into effect in 2020. Earlier this month, Texas started inspecting commercial vehicles crossing into the state from Mexico at a bridge connecting the Texas city of Brownsville with the Mexican city of Matamoros. The current inspections are causing costly delays of 8 to 27 hours, which are mainly impacting perishable foods and are generating millions of dollars in losses for both U.S. and Mexican companies, Mexico's economy ministry said in the statement. Source Reuters

Florida Man Living Underwater Won't Resurface After Breaking Record: A university professor broke a record for the longest time living underwater without depressurization this weekend at a Florida Keys lodge for scuba divers. The record was set on Joseph Dituri’s 74th day residing in Jules’ Undersea Lodge, situated at the bottom of a 30-foot-deep lagoon in Key Largo. Unlike a submarine, the lodge does not use technology to adjust for the increased underwater pressure. But Dituri isn't just settling for the record and resurfacing: He plans to stay at the lodge until June 9, when he reaches 100 days and completes an underwater mission dubbed Project Neptune 100. His research includes daily experiments in physiology to monitor how the human body responds to long-term exposure to extreme pressure. “The idea here is to populate the world’s oceans, to take care of them by living in them and really treating them well,” Dituri said. Source Yahoonews

We have alternatives that are low in correlation to traditional stock & bond portfolios. They are liquid and transparent. Minimums and fee structures vary and some are performance based only. Returns we can share are NET of Fees.

If you want to learn more, just let me know what works to learn more about your needs.

Schedule A Call Now

Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.

Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.

CTG Daily Commentary is published by Capital Trading Group, LLLP and Nell Sloane is the editor of this publication. The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.

It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.

Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.