Stocks fell slightly this morning as investors waited anxiously for debt ceiling news. The Dow gained slightly while the S&P and Nasdaq Composite both slipped. Treasurys fell yet again, casting a pall over markets.
The much-watched 10-year Treasury is on track to close out its 8th losing session in a row. The last time that happened was all the way back in March 2022 when stocks were also plummeting. This time, though, equities remain elevated despite heavy Treasury selling.
Does that mean stocks will soon join Treasurys? It seems likely given how Treasurys and the S&P have behaved over the last two years.
The difference now is that the debt ceiling debate is obviously impacting Treasurys. If a deal is struck soon, Treasurys markets should theoretically snap back. That has bulls keeping the faith despite the vast disconnect between government debt and equities.
“The president and I know the deadline, so I think we’re going to talk every day […] until we get this done,” said House Speaker Kevin McCarthy.
This stoked bullish enthusiasm after McCarthy and President Biden were unable to come to an agreement last evening. McCarthy called the meeting “productive” and “professional.”
Sentiment then faded in response to a challenge from House Republicans on whether the US government would actually default on June 1st as Treasury Secretary Janet Yellen had warned.
“We’d like to see more transparency on how they come to that date,” said House Majority Leader Steve Scalise.
“We haven’t really been able to see a lot of transparency, but it looks like they’re hedging now and opening up the door to move that date back.”
Republicans seem to think that Yellen and Biden are using the June 1st date as a bargaining chip. The longer talks drag on, the higher the odds that Republicans get their way.
Scalise wants to know if US debt is artificially being held hostage via a fake “default date” to force a Republican capitulation. If that’s what’s happening, it doesn’t seem to be working, though. This morning, Republicans stuck to their guns when addressing the media.
“The fundamental issue here is the spending. This is not about gamesmanship,” said Republican negotiator Rep. Patrick McHenry.
“This is about us getting a deal before the deadline that meets the Speaker’s message that we’re spending less money next year than we’re spending now.”
House Republican Conference Chair Rep. Elise Stefanik also banged the drum this morning on the debt ceiling, reiterating the obvious.
“Less than 10 days from a default, Joe Biden has yet to offer or accept our sensible solution that raises the debt ceiling and addresses our debt crisis,” she said.
This weighed on markets, pulling stocks from their intraday highs before they plunged through noon. If Scalise’s request does not get a sufficient response from Yellen soon, Republicans will stir up even more dust on the issue, potentially souring sentiment further as talks continue this week.