President Joe Biden is expected to sign legislation into law to raise the federal debt ceiling and avert a potential default on U.S. Treasury securities. The Senate passed the legislation Thursday night after the House of Representatives approved it on Wednesday.
Early market action Friday signaled relief among investors, but the timing of the legislation could make for rough rides ahead for debt and equity markets.
With a higher cap on borrowing (to go along with cuts in planned spending), an important question for investors is who will buy more than $1 trillion in new Treasury securities set to hit the market through August, as Joy Wiltermuth reports.
A rapid increase in supply means downward pressure on prices. The expectation of a debt-ceiling deal in Washington led to a wave of short selling of Treasury bonds, which could backfire on traders. The bond-market disruption might also affect the stock market, as William Watts explains.
Chuck Jaffe: America’s latest pullback from the debt-ceiling cliff won’t be its last
Joseph Adinolfi: Stocks may have put the debt ceiling behind them, but here are more risks to the 2023 market rally
Human consequences of the debt-ceiling deal
When the U.S. government increases borrowings quickly, its rising demand for liquidity leads to an increase in interest rates, so consumers may also be feeling more of a pinch through the end of 2023. But the debt-ceiling deal negotiated by Biden and Speaker of the House Kevin McCarthy (R., Calif) includes cuts in planned spending by the Department of Housing and Urban Development that could lead to a loss of rental assistance for tens of thousands of people, along with disruptions in other benefits, as Emma Ockerman explains.
And people with student loans have three months to get ready to resume making payments on federal student loans. Here are more details about the end of the three-year freeze on payments from Jillian Berman.
More consequences: There is a clause in the debt-ceiling deal that means bad news for Social Security
Retail saga
Retail earnings season neared its end this week with a flurry of reports, summed up here by MarketWatch’s investing- and corporate-news editor Ciara Linnane:
More: 13 retailers posted a good earnings season based on two key measures. Are their stocks worth a look?
Marriage is marriage, but LGBTQ+ couples still need to be careful with financial planning
The 2015 U.S. Supreme Court decision in Obergefell v. Hodges set a legal precedent for marriage between any two adults, however, a precedent isn’t a law. So LGBTQ+ couples need to take extra precautions when setting up financial and estate plans, as Beth Pinsker explains.
A bubble for Nvidia and maybe for AI, but not for the full stock market
Investors’ recent focus on artificial intelligence has sent shares of Nvidia Corp.
NVDA,
sky-high. The stock is up 172% this year and now trades for 22.1 times the consensus revenue estimate for the next 12 months among analysts polled by FactSet, and a forward price-to-earnings ratio of 49.3. Here are three comparisons of Nvidia’s valuations to those of its industry group, sector and the full benchmark S&P 500
SPX,
:
| Company or group | Forward P/Sales | Forward P/Sales as of Dec. 31, 2022 | Forward P/E | Forward P/E as of Dec. 31, 2022 | 2023 price change |
| Nvidia Corp. | 22.1 | 12.3 | 49.3 | 34.4 | 172% |
| S&P 500 Semiconductors and Semiconductor Equipment | 7.3 | 4.7 | 27.2 | 23.5 | 59% |
| S&P 500 Information Technology | 6.3 | 4.6 | 26.3 | 28.1 | 35% |
| S&P 500 | 2.3 | 2.1 | 18.3 | 21.5 | 10% |
| Source: FactSet | |||||
Investors may already be getting cold feet after the recent run-up for stocks connected with AI, as Theresa Poletti reports.
Mark Hulbert cites a study of market data by researchers at Harvard and the University of Hong Kong that points to high odds for Nvidia’s stock to tumble from here to what would still be a lofty valuation to expected sales and earnings, even as the same research supports the notion that we are not yet seeing a bubble for AI-related stocks.
More from Hulbert:
- Americans expect inflation to stay painfully high. That’s good news for stocks.
- Stock-market investing: How will you know when to get back in?
AI may tempt you in the stock market. Don’t let it do so at work.
Here’s how the use of ChatGPT can cause you trouble in the workplace.
Social-Security timing
Quentin Fottrell helps a reader who has saved well for retirement, but now wishes to stop working sooner than previously expected, at the age of 62. Now the question is how to generate income and when to begin drawing Social Security benefits, which increase every year you wait until you are 70.
Read on:
- Don’t plan on getting old? Read these books on aging better
- I’m 74, have little money saved and battle medical issues. ‘I want to retire so I can have a few years to enjoy life.’
Where should Glenn retire?
Jessica Hall writes the Where Should I Retire? column. This week she helps a reader named Glenn who enjoys Las Vegas but has a list of desires that make these other locations worth exploring.
Try the MarketWatch retirement locations tool, which you can use to make your own custom search.
Women dominate new entries into this industry
Jessica Hall interviews Ellen Wynn McBrayer, who describes her work as a funeral director.
Tired of looking through tedious streaming menus? Let’s cut through the clutter
Not only are the streaming menus annoying, they don’t summarize what new offerings you can expect over the next month. Mike Murphy does that here, and then drills down into individual services:
Streaming news:
- Paramount+ and Showtime will merge June 27, and prices will rise too
- Comcast to launch cable-like live-TV streaming service for $20 a month
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