Washington Watch: Debt Ceiling, Scheduled Powell Remarks Overhang Recent Rally

Market Key Takeaways:

• Stocks are experiencing a strong week, but concerns about the debt ceiling and remarks from Federal Reserve Chairman Jerome Powell are weighing on the market.
• Hopes for an end to the debt ceiling standoff and a pause in rate hikes by the Fed are driving optimism, but these outcomes are not guaranteed.
• The S&P 500 and Nasdaq 100 are near their 2023 highs, with mega-cap tech and communication services shares leading the way.
• The 10-year Treasury note yield has reached a two-month peak, potentially impacting interest-rate sensitive sectors like info tech.
• The SPX is up 9% this year, while the equal-weight index (SPXEW) is up only 1%, highlighting the influence of mega-cap stocks on the overall market.
• Retail earnings have been mixed, with discount stores performing better than others. Semiconductors have experienced a "melt-up" in their prices.
• The Fed is less likely to pause rate hikes in June, with current economic data not justifying a pause according to Dallas Fed President Lorie Logan.
• Next week's economic data includes the second reading on Q1 GDP and April Personal Consumption Expenditures (PCE) prices, the Fed's preferred inflation measure.
• Earnings for Q1 have been better than expected, but overall results are down from last year. Net profit margins have been declining but may be flattening out.
• Wholesale-driven inflation pressures on companies may be easing, which could support profit margins. Different sectors are affected by inflation to varying degrees.

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Source : Alex Coffey, Senior Trading Strategist, TD Ameritrade (https://tickertape.tdameritrade.com/market-news/washington-watch-debt-ceiling-scheduled-powell-remarks-overhang-recent-rally-19484?cid=EMTDACTTLGDP&uid=)