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On Breaking Losing Streaks, Debt-Ceiling Defaults & More

Markets drifted higher throughout the first trading session of the week, after giving up pre-market gains early. The Dow has now broken its five-day losing streak, closing +48 points, +0.14%. This was the S&P 500’s first up-session in the past three, +0.30%. The Nasdaq is enjoying its third day in the green out of the past four, +0.66%, and the small-cap Russell 2000 has now crossed back into positive territory year to date, +1.19% as of today’s close.

Apparently, market participants aren’t (yet) spooked by the prospect of a debt ceiling default on Capitol Hill. The last time we faced this level of crisis — a dozen years ago, with a Democrat in the White House and Republicans in charge of the House — the U.S. saw its first credit-rating downgrade in history before cooler heads prevailed. That wasn’t so very long ago, but perhaps lawmakers are willing to reacquaint themselves with such a self-inflicted conundrum. Talks on raising the debt ceiling reportedly continue tomorrow.

In fact, we’re seeing relative stability of late, and not only in the equities markets. Bouncing off one-month lows in the first full week of this month, with the floodgates of Q1 earnings season front and center, it’s been nothing so much as range-bound resilience — especially considering some of the harrowing predictions about this time a couple quarters ago. We’ve seen the 10-year t-bill yield at more or less +3.5%, the 2-year around +4%. This yield curve inversion shows few signs of reversing back anytime soon, but the relative steadiness of late is key.

Financials performed well today, with the further understanding of the level of contagion from regional banks in the San Francisco area and its limitations. Berkshire Hathaway (BRK.B) just this afternoon released a 13-F statement, where we saw Warren Buffett’s company taking a sizable position in Capital One COF, in addition to adding Citi C and Bank of America BAC holdings. The Oracle of Omaha did sell off roughly a billion dollars in U.S. Bancorp USB and BNY-Mellon BK shares, as of the last trading day of calendar Q1 2023.

Tomorrow we’ll see earnings results from Home Depot HD and Chinese A.I. major Baidu BIDU, both of which are expected to bring modestly lower revenue numbers year over year. But while Zacks Rank #3 (Hold)-rated Home Depot is also expected more than a -6% earnings slide from a year-ago, Baidu looks to gain +9% on its bottom line. Both companies have an excellent record of beating earnings estimates — Home Depot has one miss in the past five years, Baidu none since Q4 2013.

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