Probability of a shutdown still high
Though the Republican Party holds the House and the Senate, raising the debt ceiling limit would need 60 votes. After the Democratic victory in Alabama last month, Republican strength in the Senate has dropped to 51, and Republicans would need nine Democrats to back this debt ceiling legislation to avoid a shutdown. President Trump pulled off a last-minute deal in September to get temporary government funding that runs out on January 19. This time around, the Democrats are likely to play hardball to get the Deferred Action for Childhood Arrivals Program (or DACA) included in the deal.
The latest update on the looming debt ceiling crisis
As per reports published on Bloomberg, the House leaders are planning to get another temporary funding arrangement until February 16, giving them time to negotiate a deal with the Democrats and get the 60 votes needed to raise the debt ceiling.
Both Republicans and Democrats are aware that a US government shutdown is catastrophic for the domestic as well as the global economy. Republicans will have to come up with a plan to entice nine Democrats to back debt ceiling legislation and avoid a government shutdown. In the long run, the US GDP must increase to reduce the deficit and avoid these problems.
Volatility (VXX) in the bond (BND) market is likely to be high if the debt ceiling isn’t raised. Equity market (SPY) investors are likely to look at the Trump administration’s ability to pass this bill as a future indicator of further spending programs, like infrastructure (INXX) and defense (ITA) spending. This debt ceiling drama has a higher probability of leading to a shutdown—but like all previous shutdowns, it’s likely to be short.
On January 17, 2018, the API published its crude oil inventory report. US gasoline inventories rose by 1.8 MMbbls (million barrels) on January 5–12, 2018.
The failure of US Congress to raise the debt ceiling would result in a partial government shutdown. The US Treasury wouldn't be able to issue any government debt, and it could end up borrowing from its retirement savings fund.
In the last month the CSI 300 is down 11.5%, much more than US indices.
JCPenney (JCP) is slated to announce its results for the first quarter of fiscal 2019, which ended on May 4, on May 21.
The key point of contention in the US-China trade dispute is the large trade deficit the United States runs against China.
On May 16, the Labor Department reported jobless claims for last week. Initial jobless claims fell by 16,000 to 212,000 for the week ended May 11.
Jeffrey Gundlach recommended investors take advantage of the volatility in interest rates at the recent Sohn Conference.
Tesla (TSLA) has fallen 4.2% as of 11:55 AM EDT on May 17. While US equity markets opened in the red today, they've recouped their losses.