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“Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.” – Albert Einstein

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Futures are off their lows of the morning and trading in positive territory on reports that negotiators in Washington are close to a deal on the debt ceiling that could be voted on next week. Throughout this whole saga, there have been several false alarms, so some healthy skepticism is warranted. Ultimately, the debt ceiling will be raised and this whole charade will be out of the headlines until it comes up again in a couple of years.  Next up for the markets is dealing with the surge of issuance that will follow in the coming months.

In the near term, Fridays are likely to get a lot quieter in the coming months, but even though we’re heading into a holiday weekend, there’s still a lot of economic data on the calendar with Personal Income, Personal Spending, PCE, Wholesale Inventories, Durable Goods, and Michigan Confidence.  Buckle up. Get ready. And enjoy the first weekend of summer.

Regarding the current state of the market, the picture on the surface looks the opposite of what’s going on below the surface.  Starting with the S&P 500, after hitting a high for the year last Friday, stocks have experienced a bit of a pullback this week.  If it weren’t for NVIDIA (NVDA) on Thursday, the S&P 500 would probably be heading into today on a four-day losing streak.  Still, as shown in the chart of SPY below, we’re only a little more than 1% from the high price for the year, so at this point, the pullback looks like nothing more than a scratch.

At the sector level, though, the picture looks nothing like it does at the index level. Just two sectors are up since last Thursday’s close, and the remaining nine sectors are all down over 1% with five of them down over 2.5%.  Not only that but six sectors are trading at oversold levels.  The fact that most sectors are oversold, and only three sectors are above their 50-day moving average (DMA) isn’t the picture you would think of if someone told you that the S&P 500 was 1% from its high for the year.

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