•	*The clash surrounding the expansion of work requirements remains unresolved.*

•	*A GOP negotiator emphasizes the urgent need for a debt-limit deal.*

White House and Republican negotiators have made some progress in narrowing their differences but are still clashing on key issues as the Treasury Department indicates that there is additional time available before a potential default on US debt.

Treasury Secretary Janet Yellen announced that the department expects to be able to make debt payments until June 5 if Congress fails to act on the debt ceiling. This sets a more specific date for a potential default, although it is four days later than her previous warning of trouble as early as June 1.

This extended timeframe, known as the X-date, provides more room for House Speaker Kevin McCarthy and President Joe Biden's negotiating teams to reach a deal. Although the teams haven't met in person since Wednesday, they have been engaged in late-night discussions on Thursday and regular communication throughout Friday.

President Biden expressed optimism about the prospects for a deal as he left the White House on Friday night for Camp David, stating that he hopes they will know more by the end of the day.

Representative Patrick McHenry, one of the Republican negotiators, emphasized that the June 5 deadline underscores the urgency of reaching a deal. He stated, "We now have a solid date."

The negotiating teams continued to work into the early hours of Saturday morning to finalize the agreement's text.

One of the contentious issues in the negotiations is the inclusion of new work requirements for social programs such as food stamps and Medicaid health coverage, which Republicans support but the White House rejects.

In response to the demands for work requirements, Representative Garret Graves, another GOP negotiator, firmly stated, "Hell no! Hell no! Not a chance. This is not happening."

The White House responded to these demands, with White House spokesperson Andrew Bates stating on Friday night that President Biden and House Democrats stand against such a "cruel and senseless tradeoff."

McCarthy has indicated in recent days that a deal is slowly coming together. While the two sides have narrowed their differences, the agreed-upon details are tentative, and a final agreement has not yet been reached.

According to sources familiar with the matter, the emerging deal, which is still being finalized, would raise the debt limit and cap federal spending for two years. Additionally, defense spending would be allowed to increase by 3% next year in line with Biden's budget request.

The stock market responded positively to reports of an emerging deal, with the benchmark S&P 500 stock index rising 1.3% on Friday. This was accompanied by a decrease in yields on Treasury bills maturing in early June, indicating increased investor confidence in timely debt repayment if a deal is reached.

Deputy Treasury Secretary Wally Adeyemo cautioned that payments to Social Security beneficiaries, veterans, and others would be delayed in the event of a default. However, he expressed some confidence that an agreement will be reached, emphasizing the catastrophic consequences of a default for all Americans.

The proposed deal would also include measures to upgrade the nation's electric grid to accommodate renewable energy, aligning with climate goals. Additionally, it would expedite permits for pipelines and other fossil fuel projects favored by Republicans.

The agreement would involve cutting $10 billion from an $80 billion budget increase for the Internal Revenue Service proposed by Biden in his Inflation Reduction Act. Republicans have expressed concerns about an influx of agents and audits, while Democrats argue that the increase would pay for itself by reducing tax evasion.

The current shape of the deal would be more limited than the initial offer from Republicans, who called for raising the debt ceiling through March of next year in exchange for 10 years of spending caps. House conservatives have already voiced their objections to a smaller deal, with the House Freedom Caucus sending a letter to McCarthy demanding that he remain firm in negotiations.


•	*The clash surrounding the expansion of work requirements remains unresolved.*

•	*A GOP negotiator emphasizes the urgent need for a debt-limit deal.*

White House and Republican negotiators have ma...

Last-Minute Reprieve: US Treasury Provides Additional Time for Debt-Limit Negotiations!

Another disappointing update on inflation could sway the minds of Federal Reserve policymakers towards another interest rate hike, providing support for those who argue that more action is necessary to restore price stability.

According to figures released by the Commerce Department on Friday, the personal consumption expenditures price index, which is the Fed's preferred measure of inflation, experienced a faster-than-anticipated increase of 0.4% in April.

Cleveland Fed President Loretta Mester expressed her view on the matter in an interview with CNBC later that day, stating, "When I analyze the data and observe the inflation numbers, I believe we will have to implement further tightening. All possibilities are being considered for June."

In comparison to the previous month, the measure rose by 4.4% over the past year, slightly surpassing the 4.2% growth. Excluding food and energy, the core PCE index, often referred to as the core inflation rate, saw a 0.4% rise from the previous month and a 4.7% increase from April 2022.

Diane Swonk, chief economist at KPMG LLP, expressed concern about the Fed's direction, stating, "This is not the right path for the Fed. The outcome in June will depend on resolving the debt ceiling issues, but a rate hike in July is now a possibility."

Over the past 14 months, officials have raised rates by 5 percentage points in an attempt to control inflation, which has exceeded their target of 2%. Following a quarter-point increase earlier this month, the benchmark rate now stands at a target range of 5% to 5.25%. Fed Chair Jerome Powell stated a week ago that policymakers could afford to monitor the data and the changing economic outlook.

Before the next meeting of the Federal Open Market Committee on June 13-14, policymakers will receive additional data on employment and consumer prices. They may also hesitate to raise rates as long as there is uncertainty surrounding the outcome of the debt ceiling negotiations in Congress.

However, investors have started to increase their expectations of a rate hike next month to over 50%, up from 18% just a week ago. This shift in sentiment is driven by recent hawkish speeches by Fed officials, as well as signs of economic strength. The report on Friday revealed that consumer spending, adjusted for prices, experienced a 0.5% increase, marking the strongest growth since the beginning of the year. Following the release of the report, Treasury yields saw a significant rise.


Another disappointing update on inflation could sway the minds of Federal Reserve policymakers towards another interest rate hike, providing support for those who argue that more action is necessary t...

Is the US Economy Boiling Over? Exploring the Impact of Rising Inflation on Fed's Decision-Making

**Key Highlights**

*•	According to market veteran Ed Yardeni, the US economy is showing signs of improvement as consumers persist in utilizing their accumulated savings.*
 
*•	Yardeni's recent note suggests an increased likelihood of a smooth economic slowdown, raising the probability from 60% to 70%.* 

*•	The stock market to sustain its rally, there is one crucial element that is currently missing.*

**Introduction**

The state of the US economy has been a subject of great concern and speculation in recent times. As the nation continues to recover from the impacts of the COVID-19 pandemic, many wonder about the odds of the US avoiding a deep recession. While positive signs have emerged, there is still a crucial ingredient needed for stocks to rally and sustain the economic upswing.

**Understanding the Odds of a Deep Recession**


A deep recession refers to a severe and prolonged economic downturn characterized by a significant decline in economic activity, high unemployment rates, and a decline in consumer spending. The potential for a deep recession arises when economic indicators point towards a sustained contraction rather than a temporary setback.

**Factors Influencing the Avoidance of a Deep Recession**

**The Role of Fiscal Policy**

Fiscal policy plays a crucial role in stabilizing the economy during challenging times. Governments can implement measures such as increased government spending, tax cuts, and stimulus packages to boost economic activity and prevent a deep recession. By providing financial support to individuals and businesses, fiscal policy can help restore consumer confidence and spur investment.

**Monetary Policy and its Impact on the Economy**

Central banks, such as the Federal Reserve in the United States, have the power to influence the economy through monetary policy. Adjustments in interest rates, open market operations, and quantitative easing can impact borrowing costs, inflation rates, and investment decisions. By employing suitable monetary measures, central banks can support economic growth and mitigate the risk of a deep recession.

**Market Conditions and Investor Sentiment**

The performance of financial markets and investor sentiment can greatly influence the likelihood of a deep recession. Positive market conditions, characterized by rising stock prices and increased investor confidence, can create a favorable environment for economic expansion. Conversely, negative market conditions and pessimistic sentiment can exacerbate economic downturns and hinder recovery.

**The Importance of Consumer Confidence**

Consumer confidence is a vital component of a healthy economy. When consumers feel optimistic about the future, they are more likely to spend money, leading to increased business activity and economic growth. Maintaining or restoring consumer confidence through effective communication, stable employment conditions, and strong social safety nets can help prevent a deep recession.

**International Trade and Global Economic Conditions**

The US economy is closely linked to global economic conditions and international trade. Disruptions in international trade, such as trade wars or significant geopolitical events, can have a profound impact on the domestic economy. Close monitoring of global economic trends and fostering strong trade relationships are essential to avoid a deep recession and promote sustainable growth.

**Industry-Specific Factors**

Different industries may face unique challenges or opportunities during economic downturns. Understanding the specific factors affecting each industry is crucial for mitigating risks and supporting recovery. Industries heavily reliant on travel, hospitality, and entertainment, for example, may require targeted assistance and innovative strategies to navigate through a deep recession successfully.

**Technology and Innovation as Catalysts for Recovery**

Technological advancements and innovation can act as catalysts for economic recovery. Embracing new technologies, digital transformation, and investing in research and development can create new opportunities, drive productivity gains, and stimulate economic growth. Encouraging innovation and providing resources for technological advancements are vital for avoiding a deep recession.

**The Potential Impact of Policy Changes**

Policy changes, such as regulatory reforms or changes in tax policies, can have a significant impact on the economy. Governments must carefully consider the potential consequences of policy decisions to ensure they support economic stability and growth. Well-calibrated policy changes can help mitigate risks and increase the chances of avoiding a deep recession.

**Analysis of Stock Market Performance**

The performance of the stock market often serves as an indicator of economic health. A robust stock market reflects investor confidence and optimism about future economic prospects. Tracking key stock market indices and analyzing trends can provide valuable insights into the odds of avoiding a deep recession and the potential for stocks to rally.

**The Need for Continued Economic Stimulus**

While the odds of the US avoiding a deep recession are rising, the economy still requires continued economic stimulus to sustain the recovery and drive long-term growth. Implementing targeted fiscal measures, supporting job creation, and investing in infrastructure can fortify the economy against potential setbacks and bolster the chances of stocks rallying.

**Conclusion**

The odds of the US avoiding a deep recession are indeed increasing, thanks to factors such as fiscal policy measures, monetary policy adjustments, and improving market conditions. However, sustained economic recovery and the ability of stocks to rally depend on continued efforts to restore consumer confidence, adapt to industry-specific challenges, embrace technology and innovation, and make informed policy decisions. By addressing these factors and remaining vigilant, the US can navigate through these uncertain times and build a strong foundation for a prosperous future.

**FAQs**

**1. Are there any guarantees that the US will avoid a deep recession?**

*While there are no guarantees, the implementation of appropriate fiscal and monetary policies, along with other mitigating factors, increases the odds of avoiding a deep recession.*

**2. How long will it take for the US economy to recover fully?**

*The timeline for full economic recovery is uncertain and depends on various factors. However, sustained efforts and strategic interventions can expedite the recovery process.*

**3. What role does consumer spending play in avoiding a deep recession?**

*Consumer spending is a significant driver of economic activity. Restoring consumer confidence and encouraging spending can help prevent a deep recession.*

**4. How can innovation contribute to economic recovery?**

*Innovation can create new avenues for growth, enhance productivity, and drive economic recovery. Embracing technological advancements and fostering innovation is crucial in avoiding a deep recession.*

**5. Is the stock market a reliable indicator of economic health?**

*The stock market serves as an indicator of investor sentiment and economic prospects, but it should be considered alongside other economic indicators for a comprehensive analysis.*

**UNEMPLOYMENT INSURANCE WEEKLY CLAIMS**

According to the seasonally adjusted data, the number of initial claims for unemployment insurance in the week ending May 20 was 229,000. This reflects an increase of 4,000 claims compared to the previous week, which had been revised downward by 17,000 claims. The four-week moving average, which provides a more stable indicator, remained unchanged at 231,750.

The seasonally adjusted insured unemployment rate for the week ending May 13 was 1.2 percent, the same as the previous week's rate. The number of individuals receiving unemployment benefits during that week was 1,794,000, showing a decrease of 5,000 from the unrevised level of 1,799,000 in the previous week. The four-week moving average for insured unemployment stood at 1,800,250, indicating a decrease of 12,250 from the unrevised average of 1,812,500 in the previous week.


**Key Highlights**

*•	According to market veteran Ed Yardeni, the US economy is showing signs of improvement as consumers persist in utilizing their accumulated savings.*
 
*•	Yardeni's recent note s...

"Navigating the US Economy: Rising Odds of Avoiding a Deep Recession and the Missing Ingredient for Stock Market Rally"

The Treasury's Bureau of Fiscal Management revealed plans to auction $119 billion worth of 3-month and 6-month bills on Tuesday, with the settlement of the sales scheduled for June 1st, two days after the auction. This particular date has been highlighted by Treasury Secretary Janet Yellen as a potential deadline for the government to face a shortage of funds to cover its obligations. However, the condition for this scenario is the absence of a deal between the White House and congressional Republicans to raise the $31.4 billion debt ceiling.

Typically, the bureau would not announce an upcoming sale "until it is certain that it has room under the debt ceiling for the new securities," according to research firm Wrightson ICAP.

Gennadiy Goldberg, a senior rates strategist at TD Securities in New York, noted that the fact that the Treasury proceeded with the announcement suggests that they have the necessary cash to settle the security. He views this as a positive sign, as the Treasury has previously stated that it would not announce auctions if it did not have the means to settle them. However, Goldberg cautions that this positivity is limited, as it is highly likely that the Treasury will run out of cash in the first two weeks of June.

Despite Yellen's earlier comments indicating a possible X-date as early as June 1st, most Wall Street firms estimate that the Treasury will exhaust its borrowing capacity between June 6th and June 9th. Currently, the government's cash balance stands at $68.34 billion as of Monday, showing a slight increase from $60.66 billion on Friday but a decrease from $87.43 billion a week earlier.

Of significance, June 1st marks the maturity date for approximately $117 billion worth of T-bills. The uncertainty surrounding the X-date has led to high volatility in the market, with the yield on that issue soaring to a record high above 7% on Wednesday. However, it declined on Thursday following the Treasury's auction announcement for bills settling on June 1st, alongside signs of progress in the debt ceiling negotiations. The yield currently stands at 5.89%.

Considering the urgency of the situation, talks between the Biden administration and Republicans in the US House of Representatives have reportedly made progress. A potential deal is taking shape, with the two sides differing by only $70 billion on a total figure that would exceed $1 trillion, according to a source cited by Reuters.


The Treasury's Bureau of Fiscal Management revealed plans to auction $119 billion worth of 3-month and 6-month bills on Tuesday, with the settlement of the sales scheduled for June 1st, two days after...

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4 articles published related to#debt crisis

Last-Minute Reprieve: US Treasury Provides Additional Time f...

Is the US Economy Boiling Over? Exploring the Impact of Risi...

"Navigating the US Economy: Rising Odds of Avoiding a Deep R...

The recent announcement by the US Treasury regarding its deb...

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