This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
On to the next roadblocks for markets.
Late Saturday, President Joe Biden signed a temporary stopgap extension to sidestep yet another government shutdown. The House voted 335-91, and the Senate voted 88-9 to advance the measure. How did this get done? Basically, $6 billion in Ukraine aid was left out (as the kids would text, SMH).
The next funding deadline is Nov. 17, the week before Thanksgiving.
Disaster avoided, for now.
But you will likely see a groundswell of Wall Street chatter on how the debt ceiling drama time and time again is slowly eroding confidence in the country. You will also probably hear fretting over the US credit rating and our bloated debt position in the context of a fractured government.
"Why bother investing in US assets?" those camps will mutter.
And yes, the clock is ticking for the restart of a sell-off in stocks ahead of the new Nov. 17 funding deadline (like we saw this time around).
However, all that aside, the markets in the near term will be inclined to take their cue from two things unrelated to Republicans and Democrats. They both don't strike me as bullish for equities.
First, there is the second-to-last Fed meeting in the last week of October. In the run-up to that, be prepared for a fresh dose of Fedspeak that could lay the groundwork for one last interest rate increase for 2023 and this cycle.
It almost has to happen, no?
Oil prices are back around $100 a barrel and inflation, while cooling, doesn't appear to be falling as quickly as Fed officials would like. The latest pop in oil prices is weighing heavily on the bottom line of businesses and their confidence, and execs I chat with are on the precipice of pushing through more price increases to compensate.
"No doubt that hurts," Carnival CEO Josh Weinstein told me on Yahoo Finance Live (video above) about oil's recent push upward.
Weinstein estimated that the increase in oil will zap $125 million in profits from the cruise line giant.
This is a Fed that has stayed on message with its desire to crush inflation, and the conditions look to be in place for it to execute on that later this month.
The interesting aspect here is that while oil prices are hurting companies, another rate hike could raise the cost of capital for companies with big-time debt such as Carnival.
In a new note out Monday, Goldman Sachs chief US strategist David Kostin says higher interest costs could be an anchor on corporate profits for the remainder of the year and into 2024.
Double negative, all linking back to the Fed.
While the Fed is out there inflation hunting, we have the other problem in sight for stocks.
Earnings season kicks off in just a few weeks.
Already, the earnings backdrop is shaping up funky in large part because the consumer is in a funky place. They appear to be putting deposits down to take Carnival cruises but don't appear to have the money to trade up a few bucks on alcohol.
"I think we've been seeing the trade down from ultra premium to premium and the premium to standard [in the US]. I think consumer confidence has been declining," Tak Niinami, CEO of Japanese whiskey company Suntory, the third-largest liquor maker in the world, told me on Yahoo Finance Live.
Consumers are pulling back a bit on flights as seen in recent airline profit warnings and are also telling department stores they can't afford to pay their monthly credit bills.
It's a weird moment in time for the economy, and companies are voicing their concern for the short-term path forward.
As it stands, 116 S&P 500 companies have issued EPS guidance for the third quarter. Of these companies, 74 have issued negative EPS guidance and 42 have issued positive EPS guidance, according to data from FactSet.
The percentage of companies issuing negative EPS is 64%. This percentage is above the five-year average of 59%.
Sure, companies often sandbag their guidance. But it's still not good to see negative pre-announcements in my humble view — it's a sign dynamics in a business are surprising executives enough to communicate to markets a valuation adjustment is needed.
So there you have it, my Debbie Downer vibe to start the week.
But hey, let's cheer the government staying open for a few more weeks!
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email firstname.lastname@example.org.