BlackMask Breaking News

U.S. gasoline demand over the Memorial Day weekend is estimated to be 1.1% lower than demand for the same weekend last year, despite the surging gas prices at the start of the driving season in 2022, data from fuel-saving app GasBuddy showed early on Tuesday. “According to GasBuddy data, US gasoline demand over the Memorial Day weekend (Thur-Mon) so far is down 1.1% from 2022. Once Tuesday is complete, we’ll add it to see the total weekend,” GasBuddy’s head of petroleum analysis, Patrick De Haan, said. On Memorial Day on Monday, gasoline demand in the United States was down by 3.6% compared to Memorial Day 2022, according to GasBuddy data, De Haan noted. Gasoline prices in the United States were up slightly on Memorial Day, the official start of the summer driving season, though Americans are still paying less at the pump than they were a year ago, or even a month ago. The national average price for a gallon of gasoline at American pumps on Monday was $3.582, up from $3.540 a week ago, but down from $3.615 a month ago and $4.610 per gallon a year ago, according to AAA. Forecasters had expected Memorial Day gasoline demand to increase by 6% year-over-year for 2023, predicting that more than 37 million Americans will have hit the roads over the extended holiday weekend. While GasBuddy estimates weaker demand this Memorial Day weekend compared to last year, the Transportation Security Administration (TSA) said on Tuesday that the number of airline passengers during the Memorial Day weekend exceeded pre-Covid levels from 2019 by 300,000. Over the four-day Memorial Day weekend, TSA screened almost 9.8 million individuals at airports nationwide, which is about 300,000 higher than the same holiday weekend in 2019. Friday’s final volume of about 2.74 million passengers screened was the highest post-pandemic single-day record, TSA said.

NN: They decided to fly more then drive. Planes do not burn gasoline. But they sure as hell burn a lot of kerosene.

U.S. stock futures rose on Tuesday amid relief a debt-ceiling deal was secured that now needs Congressional approval. U.S. stocks were looking to start the holiday-shortened week at fresh 10-month highs as traders welcomed a deal to extend the government debt-ceiling and as optimism over AI-derived earnings continued to underpin sentiment. “Volumes should return to normal today after the U.S. long weekend, so we should get a much better read on market trends where optimism over a U.S. debt ceiling agreement may continue to support risk assets for the early part of the week,” said Stephen Innes, managing partner at SPI Asset Management.

Some analysts were more cautious, noting Congress must still pass the deal and this uncertainty may keep a lid on ebullience.

“While the initial reaction is likely to be positive, sentiment will be tempered fact that the deal is not yet over the line, with the next hurdle being Congress where there have already been some rumbles of dissatisfaction. In any event, further developments will be keenly awaited this week as the political saga continues to unfold, and until a definitive agreement is reached, markets are likely to resume something of a holding pattern,” said Richard Hunter, head of markets at Interactive Investor. Still, equity bulls will be hoping the S&P 500 can accelerate after finally managing on Friday to close above the 4,200 mark that had proved a stubborn top to a multi-month trading range. Support could come from big tech stocks as investors look for more AI exposure and valuations are helped by retreating bond yields as debt ceiling angst eases, according to analysts. SPI’s Innes said that after the debt-ceiling relief rally, the focus could turn back on the many concerns that have kept most Wall Street analysts in a cautious mood. “The first boat rocker could be Friday’s employment report for May which takes on immense importance as that will be the last major data point that Fed officials will have a chance to comment on before their June 14th rate decision,” said Innes.

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Good news of a tentative deal for the U.S. debt ceiling impasse may quickly turn out to be bad news for financial markets. U.S. President Joe Biden and top congressional Republican Kevin McCarthy on Saturday reached a tentative deal to raise the federal government’s $31.4 trillion debt ceiling, two sources familiar with the negotiations said, potentially averting an economically destabilizing default. But the deal still faces a difficult path to pass through Congress before the government runs out of money to pay its debts in early June. “This will be pretty good for the market,” said Amo Sahota, director at KlarityFX, adding that it may give more reason for the U.S. Federal Reserve to feel confident about raising rates again. “Although we want to see what the … deal looks like,” Sahota added. While an end to uncertainty would be welcome, the relief that may come from a deal may be a short-lived sugar high for investors. That’s because once a deal is reached, the U.S. Treasury is expected to quickly refill its empty coffers with bond issuance, sucking out hundreds of billions of dollars of cash from the market.

The raising of ceiling is expected to be followed by the issuance of nearly $1.1 trillion in new Treasury bills (T-bills) over the next seven months, according to recent JPMorgan estimates, a relatively large amount for that short a period.

This bond issuance, presumably at the current high interest rates, is seen depleting banks’ reserves, as deposits held by private companies and others move to higher paying and relatively more secure government debt. That would accentuate an already prevalent trend of deposit outflows, put more pressure on liquidity, or ready cash, available to banks, push up rates charged on near-term loans and bonds, and make funding more expensive for companies already reeling under a high interest rate environment. “There is certainly going to be a relief in the fixed income markets,” said Thierry Wizman, global FX and interest rates strategist at Macquarie. “But what this doesn’t solve, is that along the whole Treasury curve yields have gone up recently… in anticipation that there will be a lot of issuance of treasury bonds and notes and bills in the next few weeks because the U.S. Treasury has to replenish its cash.”

WASHINGTON, May 28 (Reuters) – After tough negotiations to reach a tentative deal with the White House on the U.S. borrowing limit, the next challenge for House Speaker Kevin McCarthy is pushing it through the House, where hardline Republicans are already threatening to sink it. As Democratic and Republican negotiators iron out the final details of an agreement to suspend the federal government’s $31.4 trillion debt ceiling in coming days, McCarthy may be forced to do some behind-the-scenes wrangling.

“We’re going to try” to stop it from passing the House, Representative Chip Roy, a prominent member of the hardline House Freedom Caucus, said on Twitter. House and Senate Republicans were critical of the deal’s time frame and emerging terms.

A failure by Congress to deal with its self-imposed debt ceiling before June 5 could trigger a default that would shake financial markets and send the United States into a deep recession. Republicans control the House 222-213, while Democrats control the Senate 51-49. These margins mean that moderates from both sides will have to support the bill, as any compromise will almost definitely lose the support of the far left and far right wings of each party.

To win the speaker’s gavel, McCarthy agreed to enable any single member to call for a vote to unseat him, which could lead to his ouster if he seeks to work with Democrats.

Roy complained on Twitter on Sunday that the agreement would leave intact an expansion of the tax-collecting Internal Revenue Service set in place when Democrats controlled both chambers of Congress. Senator Lindsey Graham also expressed concern about the deal’s potential effect on U.S. defense and Washington’s support for Ukraine.

“Do not intend to default on debt, but will not support a deal that reduces the size of the Navy and prevents continued technological and weapons assistance to Ukraine,” Graham tweeted.

“Punting at your opponent’s one-yard line isn’t a winning strategy,” Republican Senator Mike Lee said on Twitter. The deal suspends the debt ceiling until January 2025, after the November 2024 presidential election, in exchange for caps on spending and cuts in government programs. Representative Dan Bishop and other hardline Republicans were sharply critical of early deal details that suggest Biden has pushed back successfully on several cost-cutting demands on Saturday, signaling that McCarthy may have an issue getting votes. “Utter capitulation in progress. By the side holding the cards,” Bishop said. Progressive Democrats in both chambers have said they would not support any deal that has additional work requirements. This deal does, sources say, adding work requirements to food aid for people aged 50 to 54. The deal would boost spending on the military and veterans’ care, and cap it for many discretionary domestic programs, according to sources familiar with the talks. But Republicans and Democrats will need to battle over which ones in the months to come, as the deal doesn’t specify them. Republicans have rejected Biden’s proposed tax increases, and neither side has shown a willingness to take on the fast-growing health and retirement programs that will drive up debt sharply in the coming years. Several credit-rating agencies have put the United States on review for a possible downgrade, which would push up borrowing costs and undercut its standing as the backbone of the global financial system. NN: I see little to celebrate here. Still not enough information to know if this dog will hunt. Their is a lot of pressure on right wing Republicans to step on this cockroach.

GOP lawmakers reportedly worried about debt ceiling hike

• The Fed could pop the AI bubble in stocks, and investors shouldn’t chase the hype, Bank of America said.
• That’s because financial conditions are tight, a factor that’s burst Wall Street’s excitement in the past.
• BofA previously said AI was a “baby bubble,” which could burst if the Fed keeps hiking rates.

Rarely does a tech-powered stock rally come along that isn’t pilloried for the fragility of its foundation. Now, with a snowballing craze for artificial intelligence pretty much propping up the market by itself, the haters are out in force.

Never have so few stocks shouldered so much of the load in indexes such as the S&P 500 and Nasdaq 100, upon which trillions of passively invested dollars ride. 

The top-heaviness of advance, on display all year, can be seen by comparing the Nasdaq 100 to a version of the same index that strips out its market-value biases. The equal-weighted one, which treats Apple Inc. the same as Dollar Tree Inc., has trailed the standard benchmark by 16 percentage points since January. In the S&P 500, the unweighted version is losing by the widest margin since Bloomberg’s data began in 1990. To much of the pundit class, the situation is replete with risk: what happens to the market when the hype-cycle around AI ends? Peter Tchir, head of macro strategy at Academy Securities, sees it differently. Piling into a few heavyweights is just investors “being rationally selective.” “The relative performance of various sectors makes sense to me,” he said. “I’m eyeing the lack of breadth, but it’s not bothering me much at the moment.” Supercharged by a $190 billion rally in Nvidia Corp., the Nasdaq 100 climbed for a fifth straight week with a 3.6% gain, trouncing other indexes amid smoldering concerns about rising interest rates and a recession.

Thanks to a blockbuster sales forecast from Nvidia., the seven largest tech stocks — also including Microsoft Corp, Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Tesla Inc. — added a combined $454 billion in value over five days, pulling the S&P 500 to a second straight weekly gain.  Up a formidable 43% since January, the Big Seven’s median gain is almost five times the S&P 500. Valuations look stretched, with a price-earnings multiple of 35 that’s 80% above the market’s. “These are good companies. They’re not going bankrupt. But people are starting to pay exorbitant prices for them. It feels frenzy-ish,” said Michael Mullaney, director of global research for Boston Partners. “If the leadership was all crappy companies like we saw in 2000, it would be game over very shortly.”

Warnings that this type of concentration will incinerate the wider stock market have been a recurring feature of commentary year after year. The latest came from Morgan Stanley’s top-ranked strategist Mike Wilson, who cited it as one reason that the equity advance is unsustainable.  But bailing out because of weak breadth has been the furthest thing from a sure-bet trading strategy, historically.  While tech’s extreme dominance in the late 1990s set the stage for the dot-com crash, there have been a total of 15 years over the past three decades when the equal-weighted S&P 500 trailed the cap-weighted version. Among them, only three gave way to losses 12 months later. In 1998, when the gap between the two widened to 16 percentage points, stocks kept rallying for another year.  In other words, there’s no obvious reason to expect a lopsided market to spell imminent doom. Instead, it’s usually a worsening fundamental backdrop that turns the tide, and when that happens, even the sturdiest companies can’t hold up. Buttressing big tech’s superior performance now is a gale of tailwinds ranging from AI optimism to better-than-expected earnings and a flight to safety assets. Optimism that a debt accord would be reached also bolstered sentiment Friday. Bill Harnisch, chief investment officer at Peconic Partners, whose fund is up 19% this year through Thursday, covered short positions in Microsoft earlier this year while adding to long holdings in Amazon and Alphabet. While sticky inflation and continued restrictive monetary policy suggest the market is likely to retreat from recent highs in coming months, he expects these tech giants to remain as safe havens for troubled investors. “People gravitated for the seven names because we call them assured growth,” Harnisch said. “I don’t feel we’re missing anything with the market. It’s just amazing what’s going on underneath the surface. And if this AI thing is what we all think it will be, there’ll be a lot of opportunities beyond Nvidia.” One constituency the oligarchic rally is indisputably creating headaches for is stock pickers. Five months into the year, only 33% of large-cap mutual funds are beating their benchmarks, compared with a historic average of 38%, according to data compiled by Goldman Sachs Group Inc. strategists including Cormac Conners and David Kostin. They attribute the lackluster performance to a chronic aversion to tech megacaps, a posture partly due to a Securities and Exchange Commission rule limiting a fund’s ownership in a single stock to 5%.

For everyone else — from passive buy-and-holders to hedge funds, the Big Seven’s relentless gain is either a non-issue or a route to relative riches. Hedge funds have boosted their holdings to 16% of their overall single-stock net exposure, up from 9.7% at the start of the year, data compiled by Goldman’s prime brokerage show.  In some ways, the anxiety over tech’s ascent reflects prevailing pessimism among investors who keep looking for things to distrust the equity rally. Yet despite all the traps lain in front of the market — recession, falling profits, an aggressive Federal Reserve — stocks have refused to budge. That’s in part because the very bearish stance leaves the market prone to more upside.  “We point to the lack of breadth in the market and the risks around crowdedness and concentration,” Bobby Molavi, a managing director at Goldman, wrote in a note. “Then we realize that people are under positioning and willing the market lower, and that for now, as has been the case for much of 2023, the market will not give the fans what they want.”