Stocks closed lower on Friday, but higher for the week.

For the week, the Dow was up 0.38%, the S&P was up 1.65%, and the Nasdaq led the way with a 3.04% weekly gain. That makes it 4 up weeks in a row for the Nasdaq.

Better than expected earnings from Deere & Company before the open on Friday helped lift stocks early. But it didn't last. Nonetheless, they posted a positive EPS surprise of 12.6%, and a positive sales surprise of 8.32%. They also raised their net income guidance for all of 2023 to $9.25B-$9.50B (midpoint of $9.38B), from their previous guidance of $8.75B-$9.25B (midpoint of $9.0B). Like the market, they opened higher but gave up their early gains by day's end.

News that debt ceiling talks hit a snag helped turn stocks lower. But the selling was relatively minor. Who knows what shape the debt ceiling negotiations and deal ultimately looks like. There have been some interesting ones in the past. And they almost always seem to go to the last minute (or slightly beyond). But since 1960, there's been 78 times Congress has raised the debt ceiling ? regardless of how ugly the talks got ? and never defaulted.

It's almost unimaginable to think Congress would default. It would be a catastrophic mistake that would severely raise the cost of servicing our debts in the future. There would be no political winners. That being said, the market seems to be acting like a deal will get done eventually. There's bound to be some volatility as the deadline gets closer. But with a 100% track record of raising the debt ceiling over the last 60 years, it's probably the right bet.

In other news, Fed Chair, Jerome Powell said "our policy rate may not need to rise as much as it would have otherwise to achieve our goals" (of 2% inflation). This was said is response to the banking crisis that he said has tightened credit and could weigh on economic growth. And he acknowledged that the disruption the crisis has caused to the financial system could impact the Fed's decision.

The comments were taken bullishly in that it's looking more likely that the Fed does indeed pause in June. Although, most have already been assuming they would, based on his previous comments. So I wouldn't characterize Friday's comments as new. And he still keeps his hedge in there when he says the path is undecided or that it's unknown.

The shocker at this point would be if they raised in June. Gladly, all the talk seems to be heading in the pause direction for now.

Stocks are doing well this year, although the performance has been a bit uneven. YTD the Dow is only up 0.84%, while the S&P is up 9.18%, and the Nasdaq is up 20.9%.

But when you step back and look at them all from their bear market low close last year, they even out with the Dow up 16.4%, the S&P up 17.2%, and the Nasdaq up 23.9%.

We still have to get thru the debt ceiling drama.

And inflation is still too high.

But inflation is declining. The Fed is likely on pause. Personal incomes are hovering near all-time highs. And the economy, while slowing, is resilient. And that suggests more upside to go.

See you tomorrow,