Market Call

The S&P 500 has been remarkably quiet over the past couple of weeks just below its February 2 high and above both its 50-dma and 200-dma (chart). The earnings season started well with better-than-expected results from the major banks. Investors may be marking time waiting to see if Fed officials will proceed with the widely expected 25bps hike in the federal funds rate at the May 2-3 meeting of the FOMC. The key issue is will they announce that a pause is warranted given the banking crisis. We think so.

That would be bullish for stocks. On the other hand, the Treasury is running out of money faster than anticipated, bringing the debt ceiling crisis to a head sooner in June (chart). Federal tax receipts have been weaker than Treasury expected, while federal outlays have been rising again in recent months (chart).