Congress passed a budget deal yesterday that lets the Treasury keep borrowing until February 7th. Congress chose February 7th because on February 8th the Treasury will have the authority to use special accounting maneuvers called “extraordinary measures” that allows the Treasury to keep paying its bills. This means that the Treasury resets the debt ceiling in accords with the additional amount it borrows. In other words, the debt ceiling today is approximately $16.7 trillion. If the Treasury borrows 300 billion, then the debt ceiling will reset to $17.0 trillion on February 8th.
Hopefully this budget deal, signed by the President last night, will give Congress time to compromise. Many in Congress on both sides agree, however, that there shouldn’t be another government shutdown in coming months, which is a relief to markets for now.
The S&P 500 was up another 0.67% to 1,733 while the 10-year Treasury fell 3.14% to 2.59%. Now that the government is up and running, markets are focusing on Q3 earnings. Many have low expectations for Q3, but I personally think the market will continue to drift upwards until Fed tapering discussions re-appear. My top stock pick continues to be Apple (AAPL).