S&P 500 Stocks, Treasury Yields Under Pressure on US Debt Ceiling

On the market risk front, there are concerns among traders about the possibility of a US default and slowing economic growth ahead of key data or events. However, mixed US data in circulation supports market caution, as stated by Thomas Barkin of the Richmond Fed. However, this can also create anxiety ahead of key data or events. It is worth noting that concerns about a US default also affect market sentiment, although there have been recent challenges to the Fed's hawkish outlook that could provide some breathing space for bearish market players. Currently, the mood in the S&P500 Futures market remains indecisive, with slight offers around 4,220 at the time of writing. This comes after a mixed Wall Street close, while US Treasury yields remain depressed lately. In addition, the US Dollar Index (DXY) is also showing weakness around 104.00 after halting a six-day uptrend and hovering near a 10-week high. Related data showed that the Conference Board (CB) Consumer Confidence Index fell slightly to 102.30 in May, compared to an upwardly revised 103.70 recorded in April (previous 101.30). The survey report also noted that consumers’ one-year inflation expectations fell to 6.1% in May from 6.2% in April. Additionally, the Dallas Fed Manufacturing Business Index for May also fell to -29.1 from -23.4, beating market expectations of -19.6. Richmond Fed President Thomas Barkin, in line with the data, said that he sees evidence that rising interest rates have curbed demand. China’s official PMI showed a mixed bag, with most manufacturing sectors showing a downbeat reading, although the Non-Manufacturing PMI appeared to be less affected. Looking ahead, the market could face a sluggish day as investors could turn more cautious ahead of the key event in the US, the House of Representatives vote on the US debt ceiling deal. In addition, it is important to pay attention to the US JOLTS Job Openings data for April, which is expected to come in at 9.375 million compared to the previous 9.59 million, as well as the Chicago Purchasing Managers’ Index for May, which is expected to fall to 47.0 from 48.6. If the US Republicans block the debt limit extension, traders could be in for a surprise and the situation could boost risk assets, which in turn would give hope to the pessimists. However, the US dollar may not follow the same pattern and could come under bearish pressure if the US data disappoints by a significant margin.

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