Stocks were hoping they’d catch a break today on the inflation front...and when they did, they shot higher. Treasuries also rallied sharply, while gold and silver reversed earlier losses. The dollar fell while crude traded mostly flat.
On the news front...
Today was “Inflation Day” and the markets liked the news. The MONTHLY readings for April were +0.4% on the headline Consumer Price Index (CPI) and +0.4% on the core (ex-food and energy) CPI...which was exactly in line with estimates. But the YEARLY CPI dropped to 4.9% versus a forecast of 5%. Having a “Four Handle” on the inflation number spread cheer up and down Wall Street.
Shocking, I know. But the White House meeting between President Biden and House Speaker Kevin McCarthy yesterday didn’t result in any breakthroughs on the debt ceiling. The US could theoretically default as soon as June 1 if Congress and the President can’t come to an agreement about raising the debt ceiling. More high-level talks are scheduled for Friday.
In the meantime, aggressive traders are buying insurance against a technical default in the Credit Default Swap (CDS) market. It now costs more to insure US Treasuries against default than it does to insure debt issued by such incredibly credit-worthy countries as...Greece, Mexico, and Brazil. CDS denominated in euros (because who would buy dollar-priced protection if the issuer of dollars is the one set to default?) surged to 166 basis points this week. Typically, 1-year CDS cost around 20 bps.
And in a bit of sad news for those of us whose formative years were the 1980s, MTV News just closed its doors. Founded in 1987, the pop-culture and music news division featured anchors like Kurt Loder, Tabitha Soren, SuChin Pak and many others. Parent company Paramount Global (PARA) just missed earnings forecasts, slashed its dividend, and revealed massive losses at its streaming division Paramount+.