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Race to Lift Debt Limit Intensifies as U.S. Lawmakers Struggle to Reach a Deal

U.S. Debt Ceiling Negotiations Reach Stalemate

The urgency to raise the U.S. debt ceiling has escalated as U.S. lawmakers race against time to secure a deal, aiming to avert a potential catastrophic default. Despite a crucial meeting between U.S. President Joe Biden and House Speaker Kevin McCarthy, no agreement was reached, intensifying the scramble in Washington. While Biden described the discussions as “productive,” McCarthy stated that there was “no progress” made in breaking the impasse. Both sides remain divided over spending plans, although there is a shared optimism that a resolution will eventually be found to raise the $31.4 trillion borrowing limit. However, McCarthy has emphasized the need to reach a deal this week, allowing sufficient time for Congress to vote on it before the U.S. faces a damaging and unprecedented default. Treasury Secretary Janet Yellen has reiterated the risk of the federal government running out of funds to meet its financial obligations as early as June 1, which has raised concerns among investors about potential ripple effects in global markets.

Volatility in Futures Amidst Debt Limit Negotiations

The U.S. stock futures experienced mixed and choppy trading on Tuesday, reflecting the uncertainty surrounding the ongoing debt limit negotiations. At 04:54 ET (08:54 GMT), the Dow futures contract declined by 44 points or 0.13%, while the S&P 500 futures lost 3 points or 0.07%. Conversely, the Nasdaq 100 futures saw a marginal increase of 1 point or 0.01%. On Monday, the main indices ended the trading day with muted performance, as the Dow Jones Industrial Average slipped by 0.42% and the S&P 500 inched up by only 0.02%. The tech-heavy Nasdaq Composite recorded a gain of 0.50%.

Anticipating U.S. PMI Data

Market participants are closely watching the release of the monthly U.S. Purchasing Managers’ Index (PMI), which is expected to provide valuable insights into the impact of elevated interest rates on the performance of the country’s service and manufacturing sectors. The preliminary PMI reading for May is projected to indicate a slowdown in activity for both industries, although the services sector, being a significant component of the world’s largest economy, is expected to remain in expansion territory. On the other hand, the PMI figure for manufacturing is anticipated to reach the neutral 50-mark, indicating neither growth nor contraction. Additionally, new home sales data is scheduled for release, with economists estimating a decrease in the number of new single-family properties sold in April compared to the previous month.

Lowe’s First-Quarter Earnings Amidst Season’s Conclusion

Lowe’s, the renowned home improvement chain (NYSE:LOW), is set to disclose its first-quarter results before the commencement of U.S. trading on Tuesday. As the first-quarter earnings season draws to a close, Lowe’s latest financial report will provide valuable insights into the health of the U.S. consumer, following recent numbers from other prominent retailers. Rival Home Depot (NYSE:HD) and big-box group Target (NYSE:TGT) faced challenges due to rising living costs, resulting in more cautious spending on high-priced discretionary items. Home Depot experienced a 4.2% decline in three-month sales, while quarterly comparable sales at Target remained flat. Conversely, Walmart (NYSE:WMT) surpassed expectations with a stronger-than-anticipated revenue increase, prompting an upward revision of its financial outlook. The discount retail giant benefited from robust demand for groceries, indicating a shift in consumer preference towards essential items as inflation impacts purchasing power. Other retailers reporting on Tuesday include sports equipment seller Dick’s Sporting Goods (NYSE:DKS) and kitchenware business Williams-Sonoma (NYSE:WSM).

Crude Prices Retrace Amid Debt Limit Uncertainty

Oil prices exhibited a slight decline on Tuesday, retracing earlier gains, as the ongoing uncertainty surrounding the debt ceiling talks dampened risk sentiment. The approaching start of the U.S. driving season, coupled with potential supply disruptions due to wildfires in Canada’s oil-rich Alberta province, has suggested a tightening of oil markets in the coming months. At 04:22 ET, U.S. crude futures decreased by 0.12% to $71.96 per barrel, while the Brent contract slipped by 0.10% to $75.89 per barrel. The upcoming Memorial Day weekend at the end of May typically marks the beginning of increased fuel consumption in the United States, further contributing to the outlook of tighter oil markets.

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