Consumer confidence is gloomy

Markets

US traders returning from their Memorial Day bash wasted little time placing an outsized footprint onto the proceedings where the odds on debt limit deal could soon be giving way to the myriad of macro fusses that have been grating on investors for months.

US stocks are trading slightly lower Tuesday, suggesting that the weekend “tentative" debt limit resolution was already priced into equities, or, perhaps, after an almost 10% year-to-date gain in the S&P 500, investors may be in a 'sell-the-news' mode, at least for the day. 

Suppose one thing still unites both Republicans and Democrats and even hardliners. In that case, it is a desire to avoid giving rivals like China a leg-up advantage, especially with Mainland on the economic ropes.

And while index investors try to ignore the market breadth parameters and trade the benchmark as it is, the 45% year-to-date tilt to the tape from the Info Tech sector within the S&P 500 could start to catch the eye of even the laxest risk control managers.

Amid a sideways start to a critical week of US economic data, markets are leaning towards a defensive tilt salted with some AI enthusiasm. Still, on the flip side, Energy is losing ground again, as Brent oil is getting whacked with the silly stick to the tune of a -4%+ drop in front-month contracts.

Bond markets are also taking on a defensive tilt today, with yields on 10-year Treasuries declining 10bp to 3.71%. While the lower yields could reflect the hit to growth impulse that the spending cut on the debt limit entails, they are more likely to reflect how gloomy Americans feel as they ponder the reality of stagflation as foreshadowed by the pessimism in the Consumer Confidence Board Index which came in at a reading of 102.3, down from the upwardly revised 103.7 in April.

Oil 

Oil prices year-to-date continue to revolve around macro concerns and recessionary fears. And even though realized oil demand has generally proven resilient and global oil demand forecasts have been revised higher, macro investors are looking through oil analysts' crystal balls.

With the low-hanging fruit from the China reopening spoiling and international travel only slightly recovering, oil demand is still below lofty expectations, especially in the context of deteriorating demographic changes and rapid EV adoption.

But on the prompt markets, chaos is a result in no small measure due to the very apparent discord between two of the world's biggest oil producers ( Russia and Saudi Arabia) ahead of a crucial meeting between members of OPEC and a group of Russia-led oil producers, jointly known as OPEC+.

A non-compliant Russia could lead to further complaint issues within the Middle East and North African OPEC faction.