Stocks In Holding Pattern, Treasury Debt Cost Rises as Debt Ceiling Standoff Continues

Barry Adams
16 May, 2023
New York City

Stocks lacked direction as investors awaited an update on debt ceiling talks and consumer health worries resurfaced after retail sales barely kept up with inflation. 

President Joe Biden and congressional leaders are scheduled to meet today and investors are hoping that two sides could find a compromise and avert the federal government shutdown. 

Treasury Secretary Janet Yellen reiterated on Monday that the federal government is most likely to run out of cash as early as two weeks and the failure to suspend or lift the debt ceiling is costing the Treasury in higher interest rates. 

The yields on Treasury notes maturing in four weeks has jumped to 5.60%. 

Investors were also rattled after Home Depot forecasted sales and comparable store sales in 2023 to decline between 2% and 5% from 2022

 

Retail Sales Just Keep Up with Inflation 

Retail and food services sales increased 0.4% in April to $686.1 billion, the U.S. Census Bureau reported Tuesday. Sales increased 1.6% from a year ago. 

Preliminary estimate of retail and food services sales are adjusted for seasonal and calendar variations but not for inflation. 

The consumer price inflation from the previous month was 0.4%, indicating that sales are just keeping up with inflation but real sales are not expanding. 

Retail trade sales were up 0.4% from the previous month, and up 0.5% from a year ago and nonstore retailers were up 8.0% while food  services and drinking places were up 9.4%.  

Sales of motor vehicles and parts dealers increased 0.4% and building materials and garden supplies advanced 0.5% and sporting goods stores decreased 3.3%. 

Sales at gasoline stations declined 0.8% in April, despite the rise in gasoline prices, on top of 14.6% fall in sales in the month a year ago. 

Core retail sales, which excludes automobiles, gasoline and building materials, accelerated to 0.7%, indicating sustained consumer demand. 

 

U.S. Indexes & Yields 

The S&P 500 index decreased 0.34% to 4,122.34 and the Nasdaq Composite fell 0.06% to 12,358.06.

The yield on 2-year Treasury notes increased to 4.03%, 10-year Treasury notes edged up to 3.53% and 30-year Treasury bonds held at 3.87%. 

Crude oil rose $0.21 to $71.27 a barrel and natural gas prices rose 3 cents to $2.41 a thermal unit. 

 

U.S. Stock Movers 

Home Depot Inc decreased 2.2% to $282.54 after the home improvement retailer reported smaller-than-expected revenue. 

Dish Network Corp increased 7.2% to $6.57 after director James DeFranco said in a regulatory filing the purchase of 3 million shares. 

Capital One Financial Corp increased 6.5% to $94.95 after Warren Buffett controlled Berkshire Hathaway acquired a new stake in the company for $950 million. 

Nu Holdings Ltd increased 5.7% to $6.42 after the fintech company reported first-quarter revenue of $1.6 billion and adjusted earnings of $182.4 million.