The debt ceiling talks in Washington look like they will come down to the wire. Aside from how baffling it seems that politicians would consider voluntarily defaulting on bonds, the situation is creating lots of uncertainty.<\/p>\n
The decision tree gets complicated if there is no breakthrough. Do bond yields go up or down, or possibly both, in the form of a more steeply inverted yield curve? Do stocks tank or become a kind of haven? Does the Federal Reserve start cutting interest rates right away, or does it try to do something else to steady the ship? Would a collapse of talks even matter much if President Joe Biden just ignores the ceiling and issues more bonds, citing the 14th Amendment?<\/p>\n
Looking at it pessimistically, the possibilities make you wonder if the best strategy at the moment is stuffing all your money under the mattress at home\u2014the classic move of the extremely risk-averse investor. Sell in May and go away, the old stock market adage goes.<\/p>\n
Generally speaking, that\u2019s not a good idea. Pulling out of the market would mean missing out on any rally if the debt ceiling debate is resolved and things return to normal.<\/p>\n
But, even putting aside the debt ceiling, the outlook doesn\u2019t seem great. After the latest round of company results, it appears the earnings outlook for most is more or less flat the rest of the year. Reports from retailers such as Dollar Tree, Costco, and Lowe\u2019s will tell us more this week, but an aggressive campaign of Fed hikes will dent earnings sooner or later. Talk of recession hasn\u2019t gone away, even if its onset has been repeatedly delayed.<\/p>\n
For now, staying on the sidelines feels tempting.<\/p>\n
\u2014Brian Swint<\/em><\/p>\n *** Join Barron\u2019s senior managing editor Lauren R. Rublin and deputy editor Ben Levisohn today at noon when they speak with Doug Peta, BCA Research\u2019s chief strategist, on outlook for financial markets, industry sectors, and individual stocks. Sign up here.<\/em><\/p>\n Try your hand at this morning\u2019s Barron\u2019s digital jigsaw, which is based on the week\u2019s cover story. For all games, including the daily crossword and sudoku, click here.<\/em><\/p>\n President Joe Biden and House Speaker Kevin McCarthy (R., Calif.) will meet again this afternoon to try to complete a deal to avoid a U.S. debt default after their aides meet again Sunday night to hammer out remaining issues, the White House said.<\/p>\n What\u2019s Next:<\/strong> Rep. Chris Van Hollen (D., Md.) told ABC\u2019s This Week<\/em> that Democrats should move on to other options, including a so-called discharge petition, a way to bypass Republicans by going to a vote. \u201cI think the markets are going to get shaky,\u201d the longer there is no deal, he said.<\/p>\n \u2014Janet H. Cho<\/em><\/p>\n China\u2019s Cyberspace Administration told companies involved in the country\u2019s critical information systems to stop buying chips from U.S.-based What\u2019s Next:<\/strong> Micron CEO Sanjay Mehrotra attended the weekend\u2019s Group of Seven summit in Japan, the FT reported. Micron said it was evaluating the agency\u2019s conclusion and assessing its next steps.<\/p>\n \u2014Janet H. Cho<\/em><\/em><\/p>\n Nvidia has said a new supercomputer based in the U.K. will run on its new brand of central-processing units. It\u2019s an illustration of the chip maker\u2019s push into CPUs, an area historically dominated by Intel and What\u2019s Next:<\/strong> While a university supercomputer is a flashy application of Nvidia\u2019s CPU technology, the real test will be its adoption in corporate data centers. It will face a stiff test to win market share against the processors of Intel and AMD, which are backed up by decades of market relationships, so it could take several years to judge Nvidia\u2019s CPU progress.<\/p>\n \u2014Adam Clark<\/p>\n \n Dollar Tree,<\/span><\/p>\n Costco Wholesale Corp.,<\/span><\/p>\n Best Buy,<\/span> BJ\u2019s Wholesale Club,<\/span><\/p>\n Dick\u2019s Sporting Goods,<\/span> What\u2019s Next:<\/strong> On Friday, the Bureau of Economic Analysis will report personal income and expenditures for April, both of which are expected to have risen from March. The Fed\u2019s preferred inflation measure, called the core personal-consumption expenditures price index, is expected to slow to a gain of 4.4% from last year.<\/p>\n \u2014Janet H. Cho and Teresa Rivas<\/em><\/p>\n Demand for gasoline has been lackluster this year despite the drop in prices, and some experts see little chance of that changing. In addition, oil prices are weak because of slowing global demand, as high interest rates and other issues are weighing on economic growth.<\/p>\n What\u2019s Next:<\/strong> Goldman Sachs analysts forecast that a large gain in oil prices could unleash as much as $40 billion worth of buying in U.S. crude and Brent crude by commodity trading advisors, Bloomberg reported, citing a note to Goldman\u2019s clients.<\/p>\n \u2014Avi Salzman and Liz Moyer<\/em><\/p>\n***<\/h4>\n
Biden, McCarthy to Meet Again Today on Debt Ceiling<\/h2>\n
\n
***<\/h4>\n
China Bans Some Micron Sales as Chip War Escalates<\/h2>\n
\n Micron Technology,<\/span>
\n saying they pose a \u201cmajor security risk,\u201d without elaborating. The ban is needed to protect national security, the agency said on an English language version of its website.<\/p>\n\n
\n Samsung
\n or
\n SK Hynix,<\/span>
\n the Financial Times reported.<\/p>\n<\/li>\n
\n Amazon.com,<\/span>
\n Germany-based Rivada Space Networks, and London-based OneWeb. The U.S. Space Force is developing a network to support the military, and the European Union is creating one.<\/p>\n<\/li>\n<\/ul>\n***<\/h4>\n
\n Nvidia
\n Ramps Up Supercomputer Chip Battle with Intel, AMD<\/h2>\n
\n Advanced Micro Devices.<\/span>\n <\/p>\n\n
***<\/h4>\n
Retailers\u2019 Earnings to Highlight Consumer Spending Trends<\/h2>\n
\n and
\n Gap
\n are among the many retailers reporting earnings this week. The results could illuminate how lower and middle-income consumers are coping with rising prices, after other major retailers said higher grocery prices are hurting other spending.<\/p>\n\n
\n and
\n Urban Outfitters,<\/span>
\n all reporting Tuesday, will highlight consumer demand<\/strong> for clothing and other nonessentials. Discretionary sales have suffered as consumers are forced to spend more for food, MarketWatch reported. <\/p>\n<\/li>\n
\n Walmart
\n is attracting new higher-income, and younger, consumers who are likely trading down<\/strong> to less-expensive options as their budgets are squeezed. <\/p>\n<\/li>\n***<\/h4>\n
Gasoline Prices Sliding as Summer Driving Season Approaches<\/h2>\n
\n
***<\/h4>\n