In a matter of weeks, the U.S. could become unable to pay the nation's bills. Republican leaders in the House and the Biden administration spent this week working toward a deal that would lift the debt ceiling-the statutory limit on borrowing.
This fiscal year the federal government will spend about $1.5 trillion more than it collects in revenue. It covers that deficit by borrowing. If Congress doesn't raise the debt ceiling, the federal government won't be able to meet all of its spending obligations, such as interest on existing debt, Social Security benefits or military salaries. That would represent an unprecedented default with unknown and potentially serious economic consequences.
Fallout From a Default: 8.4% Mortgage Rates and a 20% Drop in Home Prices
An agreement on the U.S. debt limit could be reached by this weekend. However, if negotiations between President Joe Biden and House Republicans fall apart, the housing market won't be immune from the fallout.
A default would shake up the financial markets, including the yield on 10-year Treasury bonds, with which mortgage rates often move.
Rebound in Treasury Yields Fueled by Resilient Growth, Inflation
Yields on U.S. Treasurys have climbed to their highest levels since the week that Silicon Valley Bank collapsed, highlighting a rebound in investors' expectations for economic growth and inflation.
A closely watched benchmark for U.S. borrowing costs, Treasury yields are still well below where they were in early March. But they have now broken through the top of a trading range that had prevailed for two months, surprising investors who have been touting bonds as a hedge against recession risks.
Pause on Rates Isn't a Done Deal. Fed Officials Are Split.
The next interest rate decision isn't clear-cut, according to comments this week from Federal Reserve officials, who appear divided on the next move.
Several Fed officials have emphasized that there is still work to be done to cool inflation, while others have said it might be time to step back and evaluate the progress that has already been made.
BOJ Governor Warns of Risk of Premature Tightening
TOKYO-Bank of Japan Gov. Kazuo Ueda reaffirmed the bank's stance to maintain monetary easing and warned of the risk of premature tightening.
Japan is finally seeing signs of inflation moving toward 2% and "making hasty policy changes" could ruin such positive developments, Ueda said in a speech Friday.
Ukraine's Zelensky Expected to Travel to Japan to Attend G-7 Summit
HIROSHIMA, Japan-Ukrainian President Volodymyr Zelensky is expected to travel to Japan to make an in-person appearance at the Group of Seven industrialized nations summit this weekend, in his latest effort to press allies for military support, according to people familiar with the matter.
It wasn't clear when Zelensky would arrive at the summit, the people said. The Ukrainian president had been expected to participate in some way. He has attended virtually in the past.
U.S. Plans to Expand Sanctions, Export Controls on Russia,
HIROSHIMA, Japan-President Biden plans to unveil a new round of U.S. restrictions on trade with Russia on the first day of the Group of Seven summit here, a move designed to further squeeze the Kremlin and demonstrate allies' continued resolve to support Ukraine.
The new U.S. sanctions and trade restrictions target goods and services vital to Russia's military-industrial complex, said a senior Biden administration official who briefed reporters shortly after the president landed in Hiroshima. They are also aimed at Russia's ability to extract the oil and natural gas critical to the country's economy, the official said. Other Western allies will roll out similar new programs, officials said.
U.S., Taiwan Reach Trade Deal as Tensions With China Simmer
The U.S. and Taiwan reached agreement Thursday on a number of trade and investment measures, in an initiative that aims to deepen economic links between the partners at a time of heightened tension with China.
The 75-page agreement covers several economic sectors, including customs administration and trade facilitation, standards for good regulatory practices, regulations on domestic services, anticorruption measures, and initiatives related to small and midsize enterprises, according to a text released by both sides.
Pentagon Says Accounting Mistake Leaves U.S. With $3 Billion More in Arms for Ukraine
WASHINGTON-The Pentagon has overcounted the value of the weaponry it has sent to Ukraine by at least $3 billion, an error that could eliminate the administration's need to ask Congress for more money to keep Kyiv in the fight this spring, people familiar with the situation said.
The military services inadvertently used a higher value for at least some of the weaponry the Pentagon sent to Ukraine, using valuations for new equipment instead of the older gear pulled out of U.S. stockpiles, the people said.
Ukraine Races to Forge New Army Ahead of Offensive
In a valley far from the front lines last week, several men practiced dropping a half-full bottle of water from a small aerial drone, as though it were a grenade. Others fired rifles at targets 100 yards away. A third group set off for a trek through the surrounding hills, which burst with white and yellow flowers.
Almost none of them had military experience before last year. The Ukrainian military is racing to turn civilians into elite soldiers for the cutting edge of a critical summer offensive.
Greece's Leader Faces Elections Amid Rule-of-Law Concerns
ATHENS-Greek Prime Minister Kyriakos Mitsotakis is expected to retain power after national elections Sunday, but he is under a cloud: A festering scandal over the surveillance of political friends and foes has deepened concerns about the rule of law in a country still healing from its traumatic debt crisis.
For the past year, Mitsotakis's center-right government has struggled to rein in revelations that the intelligence service, which reports to the prime minister's office, spied on the government's own ranks, opposition lawmakers, journalists, businesspeople and army chiefs. The affair has been dubbed the "Greek Watergate."
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
None scheduled
Economic Calendar (ET):
0830 Mar Retail Sales
Expected Major Events for Friday
04:30/JPN: Mar Tertiary Industry Index
06:00/GER: Apr PPI
08:30/UK: Feb Card Spending statistics
12:30/CAN: Mar Retail trade
14:00/US: 1Q Advance Quarterly Services
14:00/US: Apr State Employment and Unemployment
All times in GMT. Powered by Onclusive and Dow Jones.
Expected Earnings for Friday
ALJ Regional Holdings Inc (ALJJ) is expected to report for 2Q.
Abaxx Technologies Inc (https://urldefense.com/v3/__http://ABXX.GR__;!!F0Stn7g!FOs6rKZPyJ_IkWyylHao4siTMuVMH0fYF2TmQS71uXwNb1daBpOjwC8pOLd46jcea3HfgYJkPXukbutNLC9-P_GwNRddCZlFsJLsbbz3msc$ ) is expected to report for 1Q.
Abraxas Petroleum (AXAS) is expected to report for 1Q.
Andrea Electronics Corp (ANDR) is expected to report for 1Q.
Ault Alliance Inc (AULT) is expected to report for 1Q.
Avalon GloboCare Corp (ALBT) is expected to report for 1Q.
Buckle Inc (BKE) is expected to report $0.92 for 1Q.
Catalent Inc (CTLT) is expected to report $0.19 for 3Q.
Deere & Co (DE) is expected to report $8.46 for 2Q.
Dominari Holdings Inc (DOMH) is expected to report for 1Q.
Environmental Tectonics Corp (ETCC) is expected to report for 4Q.
Exicure Inc (XCUR) is expected to report for 1Q.
Foot Locker Inc (FL) is expected to report $0.78 for 1Q.
Genius Brands International Inc (GNUS) is expected to report for 1Q.
Odonate Inc (ODTC) is expected to report $-1.17 for 1Q.
Oncotelic Therapeutics Inc (OTLC) is expected to report for 1Q.
PrimeEnergy Resources Corp (PNRG) is expected to report for 1Q.
RBC Bearings Inc (RBC) is expected to report $1.54 for 4Q.
RespireRx Pharmaceuticals Inc (RSPI) is expected to report for 1Q.
Spanish Broadcasting System Inc (SBSAA) is expected to report for 1Q.
Three Valley Copper Corp (TVC.V) is expected to report for 4Q.
Webco Industries Inc (WEBC) is expected to report for 3Q.
Wins Finance Holdings Inc (WINSF) is expected to report for Interim.
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ANALYST RATINGS ACTIONS
Albemarle Raised to Buy From Neutral by UBS
Amyris Cut to Hold From Buy by Jefferies
Cincinnati Fincl Raised to Buy From Neutral by B of A Securities
Dynatrace Raised to Buy From Neutral by BTIG
Essential Utilities Cut to Neutral From Buy by Northcoast Research
Hanover Insurance Cut to Neutral From Buy by B of A Securities
Intercept Pharmaceuticals Cut to Market Perform From Outperform by Raymond James
Magellan Midstream Cut to Hold From Buy by Stifel
Nutanix Cut to Mixed From Positive by OTR Global
Procter & Gamble Cut to Hold From Buy by Truist Securities
Rambus Raised to Buy From Hold by Jefferies
SciPlay Cut to Hold From Buy by Craig-Hallum
Selective Insurance Cut to Underperform From Neutral by B of A Securities
Snap-On Raised to Buy From Neutral by Roth Capital
WEC Energy Group Raised to Buy From Neutral by Mizuho
This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
05-19-23 0623ET
