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‘No good options,’ but Yellen doesn’t rule out emergency measures to avoid U.S. default. Berkshire Hathaway (BRK.A) (BRK.B) Q1 operating earnings rise 13%; ratchets up stock buybacks. What’s in store for Lucid (LCID) in Q1? Learn more about these stocks with Seeking Alpha Premium.
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A meeting on the debt ceiling is this week with President Biden and the congressional leaders. Treasury Secretary Janet Yellen said in an interview this weekend that if congress does not act, there are simply no good options in terms of emergency procedures.
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Today is catalyst watch Monday and we’re waiting for an important report due out today *audio from Kim Khan* Seeking Alpha Senior Managing News Editor Kim Khan says SLOOS is the new market buzzword
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Berkshire Hathaway reported earnings over the weekend. Q1 operating earnings gained 13% Y/Y.
OUR TOP STORY
The clock is ticking for a divided U.S. Congress to raise the federal government’s debt ceiling, which currently stands at $31.4T, but risks running out of cash as soon as June 1.
Razor-thin margins in Congress are complicating the matter.
If you remember, last week we told you that President Biden had invited House Speaker Kevin McCarthy and other congressional leaders to a meeting that is scheduled for tomorrow.
Treasury Secretary Janet Yellen appeared on ABC’s This Week with George Stephanopolous to talk about the debt ceiling.
*audio from Janet Yellen*
“It’s simply unacceptable for Congress to threaten economic calamity for American households and the global financial system as the cost of raising the debt ceiling and getting agreement on budget priorities,”
“There is no way to protect our financial system and our economy other than Congress doing its job and raising the debt ceiling and enabling us to pay our bills.”
“If they fail to do it, we will have an economic and financial catastrophe that will be of our own making, and there is no action that President Biden and the U.S. Treasury can take to prevent that catastrophe.”
That audio was from the ABC News Youtube channel.
As the U.S. gets closer to the brink of a default, talk has circulated about possible emergency options that could be used to circumvent a disaster.
When pressed to answer whether there is a “break glass” alternative, Yellen didn’t appear to rule anything out, but said she didn’t want to consider emergency procedures as there were “simply no good options.”
Some ideas that have surfaced include invoking the 14th Amendment, as well as the trillion-dollar coin and issuing debt with coupons above current yields.
Wall Street Breakfast survey: Should they use one of the three emergency procedures mentioned above to avoid a catastrophic default? Take the poll and see the results here.
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Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A) reported earnings over the weekend.
Q1 operating earnings gained 13% Y/Y. The company bought back ~$4.4B of its common stock during the quarter, compared with ~$2.6B in the last quarter of 2022.
Berkshire Hathaway also announced it won’t buy control of Occidental Petroleum (NYSE:OXY).
Those words from Chairman and CEO Warren Buffett during Berkshire’s annual meeting in Omaha on Saturday.
“We wouldn’t know what to do with it,” he said, adding that he’s confident in OXY’s management.
In March, Berkshire Hathaway (BRK.B) added almost 3.7M more shares to its OXY holdings, bringing its stake in the petroleum producer to ~23.6%.
Its Apple (AAPL) stake, at fair value, increased to $151.0B from $119.0B; Bank of America (BAC) declined to $29.5B from $34.2B; American Express (AXP), $25.0B vs. $22.4B.
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NOW MORE ON THE MARKET
U.S. stocks surged on Friday, breaking a string of declines, as investors cheered Apple’s latest earnings report and welcomed a strong jobs report, which suggested that the economy remained robust despite banking uncertainty and rising interest rates.
The Nasdaq (COMP.IND) closed +2.3%, the S&P 500 (SP500) finished +1.9% and the Dow (DJI) ended +1.7%. For the S&P 500, the upswing ended a four-session losing streak.
All 11 S&P sectors posted gains, led by Tech and Energy, which each climbed more than 2.7%. Consumer Discretionary and Financials both rose at least 2%.
Alex King from Cestrian Capital Research told Seeking Alpha, “Until they see a clean upside break in the Nasdaq they believe there is short-term risk to the downside which may surprise recent bulls.”
He went on to say that they “believe the Russell 2000 and the Dow will lead the way up in the coming days, with the S&P meandering sideways and the Nasdaq correcting some of the post-January gains.” He said they remain bullish for 2023.
In economic news, fresh government data showed that the economy added 253K jobs in April. That marked a significant acceleration from the reading of 165K in the previous month. The figure also came in above the 180K that economists had predicted. Meanwhile, the unemployment rate dipped to a multi-decade low of 3.4%.
The jobs report encouraged selling in the fixed-income market. This sent Treasury yields higher. The 10-year yield (US10Y) advanced 8 basis points to 3.44% and the more rate-sensitive 2-year yield (US2Y) jumped 18 basis points to 3.91%.
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MORE OF OUR TOP STORIES
Today is catalyst watch Monday.
We’re hearing from Seeking Alpha Senior Managing News Editor Kim Khan about a new market buzzword, SLOOS.
*audio from Kim Khan*
But what makes this report different?
*audio from Kim Khan*
The SLOOS report is due out today.
Now let’s turn to Kevin Curran with a look at earnings for the week.
*audio from Kevin Curran*
One of the companies set to report earnings today is Lucid. This stock has a warning on Seeking Alpha that says it is at high risk of performing badly.
SA Analysts say it’s a hold, Wall Street says its a buy and the Quant Rating says it’s a strong sell.
Juxtaposed Ideas told its 6K followers on Seeking Alpha that depending on the volatile macroeconomic environment and auto loan default rates, we may see the stock further retest its support levels ahead.
They say they would not recommend adding the LCID stock due to potential volatility.
I’ll leave a link to the article in show notes.
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Billionaire and activist investor Nelson Peltz is said to be looking to engineer a shakeup at Estee Lauder (NYSE:EL).
According to a NY Post report on Sunday, which cited people familiar, a shakeup could include the removal of the company’s CEO.
He may also be looking ultimately for an eventual sale of the $72 billion cosmetics giant.
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If you’d like to see a transcript of the podcast. You can always find an abridged transcript of the podcast on Seeking Alpha.com. There’s a link in show notes that says Wall Street Breakfast. Just click on the podcast for today and that’s where you’ll find the transcript.
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Now let’s take a look at the markets as of 6:20 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are mixed. The Dow is up 0.2%. The S&P 500 is up 0.1% and the Nasdaq is down a fraction. Crude oil is up 2% at less than $73 a barrel. Bitcoin is down 3.3% at less than $28,000.
In the world markets, the London stock exchange is closed for a public holiday after the coronation of King Charles III. The DAX in Germany is up 0.1%.
On today’s economic calendar, at 1230pm the Investor Movement Index.
