The S&P 500 (Index: SPX) rose 1.65% over its previous week's closing value to end the third week of May 2023 at 4191.98.

It rose primarily as a result of an improved outlook for regional bank stocks, which notably surged during the week. The biggest market-moving news of the week came on Wednesday, 17 May 2023, after news Western Alliance had seen its deposits grow by more than $2 billion was disclosed. That announcement was taken as a positive sign that the solvency problems facing regional banks because of the Federal Reserve's series of interest rate hikes are less widespread than had been feared.

That promising development was enough to put the trajectory of the S&P 500 just a little below the middle of the alternative futures chart's redzone forecast range. This is to say that stock prices are behaving predictably. It is also to say that stock prices are not behaving exceptionally in any way.

We're making that point because the past week's market-related headlines have been jam-packed with references to the debt ceiling debate in Washington, D.C. So many, in fact, it seems to be more the result of an editorial decision to cram it into as many headlines as possible, regardless of whether it's appropriate than it does of any real market-moving news events. Through 19 May 2023, we find little to no evidence that political debate is having any meaningful material effect on the trajectory of stock prices.

The ongoing situation with regional banks because of their solvency issues however is having a more noticeable impact. Here are the past week's market-moving headlines:

Monday, 15 May 2023

• Signs and portents for the U.S. economy:
  • Oil gains over 1%, ends losing streak on tightening supplies
  • New York factory activity slumps in May - NY Fed
  • In the Market: Why US regional banks are doomed to a doom loop
• Some Fed minions claim they may hike rates higher; others signal they won't:
  • Fed officials expect interest rates to remain high, possibly rise
    • Fed's Barkin not yet convinced inflation heading steadily lower
    • Fed's Bostic: if vote on policy were today, would vote to hold steady
    • Fed's Goolsbee says May rate hike was 'close call' for him
• Bigger stimulus developing in China:
  • China central bank to keep liquidity ample, support economic recovery
• Bigger trouble developing in the Eurozone, ECB minions thinking their rate hikes aren't denting inflation:
  • Euro zone industry output falls sharply, with Ireland plunge
  • ECB rate hike impact on inflation small so far, but more coming: ECB Bulletin
• BOJ, JapanGov minions thinking they might change never-ending stimulus:
  • Japan govt gives lukewarm response to new BOJ chief's plan for policy review
  • Japan's govt, central bank debate whether sustained exit from deflation is near
  • Japan's wholesale inflation slows, may ease pressure on BOJ
• U.S. stocks higher at close of trade; Dow Jones Industrial Average up 0.14%
  • Focus shifts to retailers as U.S. quarterly results hit final leg

Tuesday, 16 May 2023

• Signs and portents for the U.S. economy:
  • Oil dips as weaker China, US economic data offset IEA demand forecast
  • US consumer spending appears solid early in second quarter
  • US manufacturing production surges in April on motor vehicles
  • US homebuilder sentiment rises to 10-month high in May
• Fed minions trying hard to claim they're not done with rate hikes, say they're going to get better at regulating banks:
  • Fed's Mester says central bank committed to getting back to 2% inflation
    • Fed's Mester says not yet at point where it can 'hold' rates
  • Fed's Barkin: 'Comfortable' with more hikes if needed - Bloomberg TV
  • US bank regulators vow tougher rules, oversight after bank failures
• Bigger trouble developing in China:
  • China's April data show economic recovery losing steam, testing policymakers
• ECB minions wonder why people don't trust them so much anymore, see near zero growth in Eurozone:
  • Central banks have lost a degree of trust, ECB's Makhlouf says
    • German investor morale plunges as recession fears rise
  • Euro zone Q1 GDP growth confirmed at 0.1% q/q, Q1 exports jump
    • German economic growth to remain muted in near term - IMF
• Wall Street declines after Home Depot outlook, US retail sales
  • Home Depot cuts forecasts, signals weakness ahead for big US retailers

Wednesday, 17 May 2023

• Signs and portents for the U.S. economy:
  • As household budgets tighten, big brands double down in dollar stores
  • US single-family building permits at 7-month high; housing slump persists
    • U.S. single-family housing starts rise in April; March revised down
  • Oil settles up $2 on optimism about US debt ceiling, demand
• Economists say Fed minions done with rate hikes, Fed's inspector general grilled over failed oversight of Fed minions' investments:
  • Fed to keep rates untouched this year; risk of U.S. default high: Reuters poll
  • Fed's watchdog defends work before Senate amid questions over his independence
• Bigger trouble developing in China:
  • China's domestic travel recovery marred by anti-spending 'special forces'
  • China's home prices rise at slower pace as demand ebbs
  • Japan's export growth hits two-year low on weak China demand
• BOJ minions see Japan exit recession:
  • Japan emerges from recession on post-COVID consumer rebound
• ECB minions see inflation rise despite their rate hikes:
  • Euro zone inflation ticks up in April
• Wall Street gets a revivifying cup of Joe as US banks brighten
  • PacWest, Western Alliance lead rebound in US regional lenders

Thursday, 18 May 2023

• Signs and portents for the U.S. economy:
  • US manufacturers can't shake that inflation feeling even as supply snarls ease
  • Oil prices settle down 1%; strong US data boosts dollar
  • US weekly jobless claims fall; labor market defying recession fears
  • U.S. existing home sales post second straight monthly decline
• Fed minions claim they're not done hiking rates yet:
  • Fed's hawks make a pitch against a rate-hike pause
    • Fed's Logan: data does not yet show June pause is appropriate
    • Fed's Jefferson: Inflation "too high," but impact of high rates not full felt yet
• Owens Corning hits 52-week high as S&P 500 advances to YTD peak
  • Analysis-Overexposed US regional banks could sell commercial property loans

Friday, 19 May 2023

• Signs and portents for the U.S. economy:
  • Oil rebounds on fading risk of U.S. debt default
  • Yellen told bank CEOs more mergers may be necessary, CNN reports
    • Translation: Yellen believes more bank failures are developing.
• Fed minions thinking about what to do with rates next, reform of bank rules:
  • Fed's Powell says risks more balanced, June policy decision unclear
    • Fed's Powell says tighter credit conditions ease rate hike pressure
  • Fed's Williams says natural rate of interest still low despite pandemic
    • Fed's Williams says world of low interest rates still prevails
    • Fed's Williams declines to connect monetary policy outlook to neutral rate view
  • Fed's Bowman backs 'targeted' bank rules reform but not 'radical' change
• BOJ minions thinking about how to end never-ending stimulus slowly:
  • Academics weigh in on how BOJ's Ueda can exit easy policy
  • BOJ's Ueda vows to maintain easy policy, rules out chance of early exit
  • Japan's inflation stays above BOJ's target, key gauge hits four-decade high
• ECB minions worried about possible bank failures, excited about keeping interest rates high:
  • ECB eyes additional steps to tackle bank deposit risks
  • ECB needs to keep interest rates 'sustainably high' to combat inflation - Lagarde
• Bank stocks dip as Janet Yellen calls for more mergers - report
  • Markets revise expectations for Fed's expected pause in June, future rate cuts

The CME Group's FedWatch Tool continues to indicate investors believe the Fed has reached the end of the series it began in March 2022 to combat President Biden’s inflation. However, the FedWatch Tool has pushed back its projection for how long the Fed will hold the Federal Funds Rate at a target range of 5.00-5.25%. It now anticipates will wait until its 1 November (2023-Q4) meeting to initiate a series of quarter point rate cuts at six-to-twelve-week intervals to address building recessionary conditions in the U.S. economy.

The Atlanta Fed's GDPNow tool projects a real GDP growth rate of +2.9% in 2023-Q2, up from the +2.9% growth rate it anticipated a week earlier.

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