Midday Market 05/09: Holding Breath for Debt Ceiling Negotiations

SPY pinned right at 410 in the first half of the trading session as bond yields and macroeconomic fears pressure tech and banking sectors amid low liquidity

After Monday's trading session with extremely low volume yesterday, cash flow continues to stall in the first half of this morning's trading session with investors mostly selling tech stocks and regional bank stocks.

Apple begins selling corporate bonds attracting massive investor interest, pulling money out of government bonds and pushing 10Y yields up to 3.53% this morning, putting heavy pressure on small caps. Not only that, selling pressure continues in regional banks after Paypal's unimpressive earnings report. Specifically, Paypal reported revenue and profit beating expectations, however competition is starting to eat into the company's margin, causing Paypal to cut its 2023 margin growth forecast from 1.25% to 1.00%. Overall, Wall Street has mixed views on Paypal's ER but according to Viet Hustler, this ER is not that bad, just showing pressure from competition as well as various external factors affecting margin.

In addition, debt ceiling negotiations will continue this afternoon with little hope of reaching an agreement as the Republican Party declares it will not support temporarily raising the debt ceiling to 09/30.

On internals, the market shows a mildly bearish bias with extremely low volume over the past 2 days. Put/Call drops in the morning indicate de-risking on both sides ahead of tomorrow's CPI report. Overall, current volume is too low to create major changes in the market in the second half of the session, with most of the market continuing to consolidate here until tomorrow morning's CPI report.