Debt ceiling detours
President Joe Biden delivers a brief update of the ongoing negotiations over the debt limit in the Roosevelt Room at the White House on May 17, 2023 in Washington, DC.
The good news: Biden will meet McCarthy in person later today to discuss the debt ceiling, after a pause in negotiations over the weekend. The bad: There's no telling how the talks will proceed.
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The Writers Guild of America may be on strike now, but we don't lack gripping drama — in the form of the U.S. debt ceiling negotiations.
It's a good thing markets were closed over the weekend, or they'd probably have fallen on McCarthy's comments that talks couldn't resume until Biden returns to the country. Investors were already spooked on Friday after their optimism evaporated when Republican negotiators walked out of the discussion. The S&P 500 slid 0.14%, the Dow Jones Industrial Average lost 0.33% and the Nasdaq Composite fell 0.24%.
To be sure, those weren't big drops, suggesting investors thought Washington would eventually reach a deal — as it always has in the past. Fed Chair Powell's comments that rates might not need to be high also cheered investors. The CBOE Volatility Index, which measures investors' expectations of where the S&P will move in the next 30 days, traded at 16.8 Friday. That's pretty near its 52-week low, indicating stability and calm.
Indeed, the major indexes had a good week. The S&P added 1.65% and the Nasdaq rose 3% for the week — their best performance since March.
Still, that was before McCarthy cranked up the rhetoric on debt ceiling negotiations. The good news is that Biden will meet McCarthy in person later today. The bad: There's no telling how talks will proceed.
Detours and divisiveness are perhaps inevitable when it comes to White House negotiations across the political spectrum. We can only have faith that the U.S. won't plunge its own economy, and the financial world, into chaos. That's a scenario that belongs on television, not the real world.
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Source: CNBC
