Attention Turns to Senate as Deadline Looms
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Stocks are lower again Monday as a weekend deal to end the shutdown and raise the debt ceiling before the October 17 deadlines proved elusive.
Dow futures are down 99, and S&P 500 futures are down 12.
While tensions continue to run high in Washington, attention has turned to the Senate to craft a deal as a House bill seems all but impossible. Negotiations in the Senate have moved away from defunding portions of Obamacare and have moved to spending levels, specifically, budget cuts required by the sequester, according to FBR Capital strategist Edward Mills. Democrats would prefer to see the sequester eliminated, but Republicans want to see the lower spending levels continued into the 2014 fiscal year, Mills notes. Democrats have been emboldened by polling data and believe Republicans are desperate to cut a deal.
If a bipartisan compromise can be forged in the Senate, there will be considerable pressure on the House to at least take a vote on the bill. "At that point, we would expect the vast majority of House Democrats to join enough Republican members to pass the bill," Mills said.
While stocks continue to sell-off, the strategist sees signs of progress, versus concern.
"In the last several days, there have been more signs of progress than concern," Mills said. "Leadership of both parties seem genuinely concerned about reaching a deal before the October 17 debt ceiling deadline, and we believe they could still attempt a short-term raise to prevent any question of default. Where we do remain concerned: There is a growing number of debt ceiling deniers who appear eager to test the October 17 deadline. On the other side, there is growing confidence among Congressional Democrats that they have Republicans in a bind, and they are seeking increases in budget levels that are going to be very difficult for Republicans to accept. We believe the current dynamic demonstrates a very real likelihood that there is still time before both sides reach a deal, pushing it extremely close to any debt limit deadline."
Dow futures are down 99, and S&P 500 futures are down 12.
While tensions continue to run high in Washington, attention has turned to the Senate to craft a deal as a House bill seems all but impossible. Negotiations in the Senate have moved away from defunding portions of Obamacare and have moved to spending levels, specifically, budget cuts required by the sequester, according to FBR Capital strategist Edward Mills. Democrats would prefer to see the sequester eliminated, but Republicans want to see the lower spending levels continued into the 2014 fiscal year, Mills notes. Democrats have been emboldened by polling data and believe Republicans are desperate to cut a deal.
If a bipartisan compromise can be forged in the Senate, there will be considerable pressure on the House to at least take a vote on the bill. "At that point, we would expect the vast majority of House Democrats to join enough Republican members to pass the bill," Mills said.
While stocks continue to sell-off, the strategist sees signs of progress, versus concern.
"In the last several days, there have been more signs of progress than concern," Mills said. "Leadership of both parties seem genuinely concerned about reaching a deal before the October 17 debt ceiling deadline, and we believe they could still attempt a short-term raise to prevent any question of default. Where we do remain concerned: There is a growing number of debt ceiling deniers who appear eager to test the October 17 deadline. On the other side, there is growing confidence among Congressional Democrats that they have Republicans in a bind, and they are seeking increases in budget levels that are going to be very difficult for Republicans to accept. We believe the current dynamic demonstrates a very real likelihood that there is still time before both sides reach a deal, pushing it extremely close to any debt limit deadline."
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