The stock market is seemingly shrugging off fears of a default on the United States debt. Although negotiations are progressing between the two sides, no guarantee exists they will compromise and come to an agreement and raise the debt ceiling.

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That said, the bond market is reacting, and the cost to insure against a U.S. default is skyrocketing. According to the N.Y. Times, credit default swaps view U.S. debt as “riskier than countries like Bulgaria, Croatia, Greece, Mexico and the Philippines. Compared with Germany, the cost of insuring U.S. debt is about 50 times more.”

Although the default risk is low, the consequences are still being determined because the U.S. has never defaulted on its debt in modern times. But hypothetically, government salaries won’t be paid; Social Security checks may not go out, debt payments may be missed, etc. As a result, the United States’ credit rating may be lowered, like in 2011, when the administration and Congress had a protracted battle over the debt ceiling.

Stock Market Overview

The stock market had a positive week. 

As shown by data from Stock Rover*, all the major indices increased this week. The Nasdaq performed best, followed by the Russell 2000 (IWM), the S&P 500 Index (SPX), and the Dow Jones Industrial Average (DIA).

Seven of the 11 sectors had positive returns for the week. Technology, Financial Services, and Communication Services were the top three sectors for the week. But the Consumer Defensive, Real Estate, and Utilities sectors performed worst.

The stock market is sending so many mixed signals

Oil prices rose 2.3% to $71+ per barrel, reversing its downward trend. The VIX (VIX) plunged and is below the long-term average. Gold (GLD) declined to below $2,000 per ounce..

Source: Stock Rover*

The Nasdaq (NDX) is performing the best for the year, followed by the S&P 500 Index, Russell 2000, and the Dow 30. Notably, the Nasdaq is in a bull market. In addition, 6 of the 11 sectors are up year-to-date. The three best-performing sectors are Technology, Communication Services, and Consumer Cyclical. But the worst-performing sectors are Financial Services, Utilities, and Energy.

Source: Stock Rover*

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