Stocks and bonds are moving higher to start the week as investors breathe a sigh of relief after a compromise was reached to suspend the debt limit. Opponents of the agreement on both sides of the aisle are threatening to slow down passage of the legislation but President Biden and House Speaker McCarthy are expressing confidence the government will avoid default.
Enthusiasm over the debt deal is unlikely to last long, as this Friday’s employment report may set the stage for another Federal Reserve (Fed) rate hike in two weeks.1 Following last Friday’s disappointing Personal Consumption Expenditures inflation report, Fed policymakers will be looking for more signs of softening in the labor market to justify a pause in rate hikes.2 With recent communication suggesting Fed officials are split about a pause at its next meeting, the employment report this week is likely to tip the scales for the central bank’s next move.
1MarketWatch – U.S. Economic Calendar; as of 5/30/2023
2CNBC – Inflation rose 0.4% in April and 4.7% from a year ago, according to key gauge for the Fed; 5/26/2023
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