Seventh-inning stretch for the debt ceiling deal

• Consumer Confidence hits 6-month low
• Nvidia joins the $1 Trillion club
• Treasury Yields tumble on debt deal optimism; 10-year falls 11.4 bps to 3.685

Wall Street has returned from a long weekend with a bit of optimism that the US will avert a potentially disastrous default. The Nasdaq is leading the way after Nvidia joined the $1 trillion in value club after announcing a couple key partnerships and outlining several AI -related products.

The spotlight remains on Washington DC and the House Rules Committee afternoon vote, which should pave the way for a House vote tomorrow.  The committee has a 9-4 GOP majority but so far only 2 confirmed “no” votes, which means the risk of needing democratic support is growing to advance the process.

If we get a House vote tomorrow, there is a chance we see a repeat of what happened during the first TARP vote during the global financial crisis.  The base case for many is that the House won’t play games this time and pass the vote.

The Senate will likely bring us more drama and take us to the very end of the 11^th hour.  The passage could be delayed until right before Treasury Secretary Yellen’s current X-date of June 5^th.

It won’t take a lot to disrupt this debt deal, but optimism remains that Congress won’t mess with putting the economy at risk of an unnecessary catastrophe. Right now, it feels like we have a one run lead and are at the seventh-inning stretch.  Once this debt ceiling deal gets to President Biden’s desk, then Wall Street can go back to focusing on potential downgrade risks, recession odds, and more Fed tightening.

US Data

US consumer confidence fell to a six-month low as the labor market cooled.  Expectations remained at levels associated with recessions, but didn’t decline as much as expected as optimism remains that the consumer will remain supported by decent short-term labor and income prospects.

The economy is weakening but still is strong enough to warrant further Fed tightening. ​

Nvidia

Nvidia’s 2-hour big reveal solidified that the AI momentum trade will keep on going. Nvidia’s historic run has made it the first chip stock and ninth stock to top $1 trillion in market value. Nvidia is not just the flavor of the month, but possibly flavor for the rest of the year.  The AI buzz is just beginning for many investors and the potential for seeing more interest is elevated.

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