Liquidity Problems in US Markets

Market Overview

1. President Biden’s recently approved debt ceiling deal could cause a shortage of money (or liquidity) in the market. To fill its own account, the US Treasury will be selling a lot of bonds, using money that banks usually have on hand. Experts warn that this could lower stock and bond values while having a similar effect to raising interest rates in the short term.

2. After Friday's positive job reports, markets rose, leading to the lowest point of the Volatility Index (VIX) in over 3 years. This suggests that investors are growing more confident about stocks. However, there's still some uncertainty, with high numbers of bets against the S&P 500, the most since 2007. On the other hand, optimism around tech stocks is nearly at its highest since late 2022.

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4. Headlines

   1. Morgan Stanley is predicting a 16% decline in corporate earnings this quarter.

   2. The Directors Guild of America (DGA) has reached a preliminary agreement with Hollywood studios on a three-year contract.

   3. Apple has released its virtual reality headset, the Apple Vision Pro.

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