The major US stock indexes finished last week little changed despite new surprise tariffs by President Trump last Thursday. The AI trade remains alive and well, providing buoyancy to the indexes. Many analysts are making arguments that AI is nowhere near bubble territory.
Markets have generally been ignoring politics, but that may prove difficult this week. The US federal government is on a course towards its latest shutdown which is set to take effect at 12:01am ET on Wednesday unless Congress can pass a budget or another “kick the can down the road” continuing resolution.
If the US federal government shuts down, that would affect the release of economic data, including this Friday’s jobs report. The job numbers will play an important role in the Fed’s next interest rate decision which is only 4 weeks away.
The best hope for avoiding a shut down is for the Senate to pass the House-approved continuing resolution which requires 60 votes. That would require flipping 7 Democratic senators which is not likely in such a short time frame. For their support, Democrats are insisting on health-care subsidy extensions and a restoration of health care budget cuts made in Trump’s signature legislation pass earlier this year.
President Trump will meet with the top 4 congressional leaders today to try to avoid a shutdown. This last-minute meeting is the first on the subject after a scheduled meeting for last week was canceled.
Last week, Trump called for mass layoffs of federal workers rather than furloughs in the event of a shutdown. The current labor market is in no position to absorb thousands of jobless government workers which would put heavy upward pressure on the unemployment rate.
Gold continues to press new all-time highs above $3800 as the US dollar weakens and the potential for a US government shutdown increases. Silver is reapproaching its 2011 all-time high, driven by market tightness and inflows into metal ETFs.
Corporate earnings premarket include Carnival (CCL) and Jeffries Financial Group (JEF) after the close.
The economic calendar is light with Pending Home Sales @ 10:00am ET.
Fed speakers include Beth Hammack @ 8:00am ET, Alberto Musalem and John Williams in separate engagements, both @ 1:30pm ET.
Volatility remains moderate and steady. The ES 5-day average daily range has ticked down to 59.75 points.
No whale bias as overnight large trader volume was too light to be significant.
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