As the debt ceiling deadline creeps closer, investors await deal from Washington

Published Sat, May 20 20239:24 AM EDT

With the end of another earnings season in sight, Wall Street's attention has turned to Washington and the debt ceiling deadline. Republican negotiators on Friday walked out of talks on raising the debt limit , abruptly ending a positive week of discussions that appeared to be leading toward a deal. Democrats and the White House have been pushing for a "clean" hike to the debt limit that would push the next deadline past the 2024 presidential election, while Republicans are pressing for spending cuts. There has been an increased sense of urgency since May 6, when Treasury Secretary Janet Yellen said the United States could run out of money to pay its debts as soon as June 1, much earlier than expected. Many investors believe this ongoing game of chicken over the debt limit is largely for show, since the U.S. has never defaulted on its debt obligations. A failure to raise the limit before June 1 could lead to a downgrade of U.S. debt by credit rating agencies, higher borrowing costs, lower consumer and investor sentiment and a crash landing into recession. We hope to see the two sides coming together on a deal in the coming days, and provided additional thoughts on the ongoing debate during Friday's Homestretch . Meanwhile, 95% of the S & P 500 has now reported quarterly earnings results. More than 75% of those companies reported better-than-expected revenue results, while 78% posted better-than-expected earnings, according to FactSet. And let's not forget about inflation. Several key macroeconomic updates, including the second reading on first-quarter GDP on Thursday and the personal spending and income report on Friday will provide more clues to how the Federal Reserve's battle with inflation is going. The spending report includes the core PCE price index, the central bank's favorite measure for inflation. That report could change perceptions on the Fed's next moves. Investors are currently pricing in little likelihood that we see another rate hike this cycle, but a hot number on the PCE could change all that. The last three companies in the portfolio report earnings in the week ahead: Palo Alto Networks (PANW) after the closing bell Tuesday; Nvidia (NVDA) after the bell Wednesday; and Costco (COST) after the close Thursday. Here are some of the other earnings to watch this coming week and all the economic data. Monday, May 22 After the bell: Zoom (ZM) 8:30 a.m. ET: St. Louis Fed president James Bullard speaks (Bullard is a non-FOMC voting member) 11 a.m. ET: Richmond Fed resident Raphael Bostic and Altana Fed president Tom Barkin speak (both alternative voting members in 2023; to be FOMC voting members next year) Tuesday, May 23 Before the bell: Lowe's (LOW), BJ's Wholesale (BJ), AutoZone (AZO), Dick's Sporting Goods (DKS), Williams-Sonoma (WSM) After the bell: Palo Alto Networks , Intuit (INTU), VF Corp (VFC), Toll Brothers (TOL) 9 a.m. ET: Dallas Fed president Lorie Logan speaks (Logan is an FOMC voting member this year) 10 a.m. ET: New home sales (April) Wednesday, May 24 Before the bell: Petco (WOOF), XPeng (XPEV), Abercrombie & Fitch (ANF) After the bell: Nvidia , American Eagle Outfitters (AEO), Splunk (SPLK), Snowflake (SNOW), e.l.f. Beauty (ELF) 2 p.m. ET: FOMC minutes from May policy meeting (central bankers raised interest rates another quarter point) Thursday, May 25 Before the bell: TD Bank (TD), Best Buy (BBY), Medtronic (MDT), Dollar Tree (DLTR), Burlington (BURL), Ralph Lauren (RL) After the bell: Costco , Gap (GPS), Ulta Beauty (ULTA), Marvell Tech (MRVL), Workday (WDAY) 8:30 a.m. ET: GDP second estimate of first quarter (initial look at GDP in Q1 up 1.1% versus 2% expected), weekly jobless claims 10 a.m. ET: Pending home sales (April) Friday, May 26 Before the bell: Big Lots (BIG) All day: Auto sales (April) 8:30 a.m. ET: Durable goods orders (April); Core PCE, the Fed's favorite inflation index, for April (reported along with personal income and spending); wholesale inventories (April) 10 a.m. ET: University of Michigan consumer sentiment index (final May) Looking back Retail sales for April, out last Tuesday, grew slower than expected: 0.4% versus 0.8% expected . The numbers signaled that consumers are struggling with inflation. TJX Companies (TJX), before the bell Wednesday, showed the off-price retailer behind T.J. Maxx, Marshalls and HomeGoods can deliver profits in a slowing economy. TJX's weaker-than-expected sales for its fiscal 2024 first quarter were more than offset by strong expense management, resulting in a beat on profitability. Also released Wednesday morning, housing starts for April sank 28.1% year-on-year basis and remain well below their pace of at least 1 million units between July 2020 and June 2022. However, Permits rose a seven-month high in April. Weekly initial jobless claims, released before the bell Thursday, dropped 22,000 to 242,000. That was also fewer than expected, which indicated the job market remains hot. Meanwhile, sales of previously owned homes in April dropped 23% year-over-year. There's a nearly 3-month supply of homes, half the supply that's considered to be a balanced market. Foot Locker (FL) shares dropped more than 25% on Friday morning after the sneaker retailer reported before-the-bell a terrible quarter. We told Club members to expect that. We have always said we're in this stock as a turnaround story, and we believe in CEO Mary Dillion who did great things when she led Ulta Beauty. As of Friday's settle, the U.S. dollar index is trading around the 103 level. Gold is trading at around $1,980 per ounce. WTI crude prices are hovering the low-$70s per barrel region. The yield on the 10-year Treasury advanced to around 3.67%. (See here for a full list of the stocks in Jim Cramer's Charitable Trust is long.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

U.S. President Joe Biden hosts debt limit talks with House Speaker Kevin McCarthy (R-CA) and other congressional leaders in the Oval Office at the White House in Washington, U.S., May 9, 2023.

Kevin Lamarque | Reuters

With the end of another earnings season in sight, Wall Street's attention has turned to Washington and the debt ceiling deadline.

Republican negotiators on Friday walked out of talks on raising the debt limit, abruptly ending a positive week of discussions that appeared to be leading toward a deal. Democrats and the White House have been pushing for a "clean" hike to the debt limit that would push the next deadline past the 2024 presidential election, while Republicans are pressing for spending cuts.

There has been an increased sense of urgency since May 6, when Treasury Secretary Janet Yellen said the United States could run out of money to pay its debts as soon as June 1, much earlier than expected.