Debt ceiling talks, inflation reading, Costco sales: 3 things to know

Yahoo Finance Live anchor Julie Hyman highlights several of this morning's developing stories.

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JULIE HYMAN: This is "Yahoo Finance" Live. I'm Julie Hyman. That's Diane King Hall in for Brad Smith. And here are three things you need to know this morning.

Edging closer to an 11th hour deal. President Biden and House Speaker Kevin McCarthy seem to be closing in on a debt ceiling agreement. That's according to various media reports. It seems that any deal could involve a cap on federal spending for two years. Although, according to the "New York Times" and "Bloomberg," it is still unclear what that limit would be.

Reports also suggest any deal could cut $10 billion from an IRS budget increase. The expansion of that agency was part of the president's Inflation Reduction Act. The Treasury has warned it might be unable to cover all of its obligations as soon as June 1.

And inflation, once again, resisting efforts to slow it down. April headline and core PCE rising 4/10 of a percent from March. The latest read on prices gives ammunition to bet that the central bank will raise rates at its meeting on June 14.

Markets had been about even on whether the Fed would pause or hike. Now, they're favoring a hike by a quarter percentage point. Both core and headline inflation rose a tenth of a percentage point more than economists estimated. And both of them re-accelerated from March. Core PCE is known as the Fed's preferred gauge of inflation mainly because it's said to be more flexible than CPI in adjusting to changes in consumer spending.

And speaking of consumer spending, the consumer spending story stays in focus with results from Costco. The warehouse chain showing it is not immune to choosier shoppers, who bought fewer bulk items last quarter. US comparable sales excluding fuel trailed estimates rising 1.8% versus an estimate of about 3 and 1/2%. Total sales also missed projections. Adjusted net income did rise by 14% and beat. Back in February, CFO Richard Galanti warning investors over weakness in big ticket discretionary items.

This is a theme we have seen across the sector from Walmart to Home Depot.