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The S&P 500 broke 4,200 final week, its highest since final August. But it surely might be a case of panic shopping for and extreme optimism.

• U.S. President Joe Biden met Home Speaker Kevin McCarthy Monday night to debate the debt ceiling — particulars on their assembly are nonetheless forthcoming, however each expressed cautious optimism on reaching a deal. Treasury Secretary Yellen warned in a brand new letter it was “extremely possible” the U.S. may default on its debt by June 1. The phrase “extremely” did not seem in her final letter.

• U.S. shares had been blended on the finish of Monday’s buying and selling as traders continued ready for a debt ceiling deal. The pan-European Stoxx 600 index was unchanged, however Greece’s Athens Common Composite Index shot up 6% after the investment-friendly New Democracy occasion gained Sunday’s election.

• JPMorgan Chase held its investor day Monday. On the occasion, we discovered the financial institution goals to generate $84 billion in internet curiosity revenue this 12 months, $3 billion larger than its April forecast. CEO Jamie Dimon warned that souring industrial actual property loans may set off one other drawback for banks, and that everybody ought to put together for even larger rates of interest.

• Certainly, Minneapolis Federal Reserve President Neel Kashkari raised the likelihood the central financial institution may improve rates of interest in July, even when it retains charges unchanged in June. “It could be that now we have to go north of 6% [on the fed funds rate]”, Kashkari mentioned on CNBC’s “Squawk Field.”

• Meta was fined a file 1.2 billion euros ($1.3 billion) by European privateness regulators for transferring information on European Fb customers to america, in what might be a landmark determination on information privateness. Meta mentioned it’s going to enchantment the choice.

• PRO Regional financial institution shares are being snapped up by insiders — the individuals who work inside the banks themselves, in keeping with a Raymond James evaluation. This implies confidence within the sector, regardless of the SPDR S&P Regional Banking ETF being 32% decrease 12 months so far.

The S&P 500 broke 4,200 final week, its highest since final August. However that is not essentially one thing to have a good time.

Traders are “panic shopping for,” Morgan Stanley fairness strategist Mike Wilson mentioned in a Monday notice to shoppers. “We consider this rally will show to be a head faux like final summer season’s.”

UBS echoed that sentiment, saying markets aren’t pricing in tighter credit score circumstances and slower financial development. There is a “higher risk-reward” to be present in bonds and emerging-market shares, wrote UBS’ Vincent Heaney.

And the direst warning of all: Traders are “braced for Armageddon,” in keeping with Stephen Suttmeier, technical analysis strategist at Financial institution of America. Suttmeier cites traders being underexposed to shares, and funds being “aggressively brief.”

Yesterday the S&P was just about unchanged. Whereas that does not recommend an impending apocalyptic situation, it does add credence to the speculation markets aren’t getting into a sustained rally however reacting haphazardly to day-to-day occasions.

In the meantime, yesterday the Dow Jones Industrial Common fell 0.4%, whereas the Nasdaq Composite added 0.5%, bringing it to its highest shut since August as properly.

Financial information to observe this week would be the private consumption expenditures index, due on Friday. It is the Fed’s most popular measure of inflation as a result of the PCE tracks how shoppers are spending their cash, and never simply the diploma of change in shopper costs.

Previous PCE studies did not transfer markets a lot, however the newest may. As UBS notes, markets aren’t pricing in antagonistic circumstances — and that would come with a protracted pause, or perhaps a hike, on rates of interest this 12 months. But when the PCE exhibits inflation continues to be excessive, the Fed is prone to take motion alongside these traces, which might thwart markets’ hopes for a fee reduce. Inventory would fall. It isn’t fairly Armageddon, however it’d be smart to brace for inflation — and charges — to remain excessive.

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