The Week Ahead: July 4-10, 2016

10:47AM Jul 05, 2016
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Lawmakers return to lingering issues, including Senate vote on GMO food labeling bill

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The House returns July 5, the Senate on July 6. Continued clashes over gun policy as well as showdowns over spending legislation for defense and financial services programs are expected, and expected Senate approval of a GMO food labeling measure highlight the holiday-shortened week.

House Republicans want votes on an anti-terrorism package that aims to prevent suspected terrorists from buying guns. Democrats previously staged a 25-hour sit-in to demand action on gun control legislation following the June 12 shooting at an Orlando nightclub. House Speaker Paul Ryan (R-Wis.) said Republican leaders are looking at all options to bring some “order out of this chaos” and prevent Democrats from shutting down the House’s work.

The White House has threatened a veto of the Fiscal 2017 Financial Services and General Government spending bill, HR 5485, writing in a statement of administration policy that the bill would “exacerbate the damaging reductions inflicted on the IRS since 2010, and irresponsibly cut funding for the agencies charged with implementing Wall Street reform.” The House wants to consider the bill this week. A rule would allow 70 amendments. Among those not made in order was a proposal from Iowa Republican Steve King to block an Obama administration plan to revise US currency notes, including placing Harriet Tubman’s image on the $20 bill.

The Senate on July 6 is expected to clear a compromise GMO food labeling measure pushed by Senate Ag panel leaders Pat Roberts (R-Kan.) and Debbie Stabenow (D-Mich.), especially after clearing a 68-29 test vote in the Senate on June 29. The bill (S 764) is likely to get a cloture vote when the Senate returns from recess July 6, a vote that needs 60 votes to succeed. The bill would create a mandatory labeling regime for food made with genetically modified organisms. Food makers would either print a text message on the package disclosing whether a product contains GMO ingredients, or print a symbol or an Internet link directing customers to GMO information. The real key ahead is what happens in the House, which passed its own GMO labeling bill in the summer of 2015 calling for voluntary labeling. House Agriculture Committee Chairman Mike Conaway (R-Texas) has said he won't back a mandatory measure, but GOP House leaders are said to favor getting the topic over and thus may support the Senate version.

The GMO bill would tightly define genetic engineering in a way that does not include new techniques such as gene editing. Beef, pork, poultry and eggs wouldn’t be subject to labeling, though the deal would cover many other grocery staples.

Of note, Sen. Jerry Moran (R-Kan.) said he is pushing to attach the Fiscal 2017 Agriculture-FDA spending bill to the GMO measure.

Defense funding, immigration. Senate Majority Leader Mitch McConnell (R-Ky.) has set up cloture votes on motions to proceed to the defense appropriations bill and two bills tightening immigration enforcement laws. One, S 2193, would increase penalties for those who illegally re-enter the US after being removed, and the other, S 3100, would direct so-called “sanctuary cities” to cooperate with federal officials seeking to remove undocumented immigrants suspected of crimes or terrorism.

The defense spending bill, S 3000, faces Democratic resistance over a possible amendment by Sen. Lindsey Graham (R-S.C.) that would increase the Pentagon’s budget by about $18 billion. Unlike the House-passed bill, HR 5293, which would tap into war funds to finance high-profile weapon buys, the Senate measure would boost those programs by finding savings elsewhere in the defense budget.

Zika. Democratic Senate leaders Harry Reid (Nev.) and Chuck Schumer (N.Y.) have stepped up pressure on Republicans to work with them to pass a Zika funding measure that President Barack Obama would sign. Reid warned that Republicans would suffer losses in the November elections if they do not. Republicans blame Democrats for Congress’ inability to pass Zika legislation, and McConnell has reserved the right to reconsider the conference report, on HR 2577, the advancement of which Senate Democrats blocked last week.

FAA. House and Senate negotiators are trying to complete work on an 18-month Federal Aviation Administration (FAA) reauthorization, said Sen. Bill Nelson (D-Fla.), the top Democrat on the Commerce, Science and Transportation Committee. The bill does not contain the House’s air-traffic control privatization plan, though it may end up seeking a report on the idea. Nelson said the bill could include consumer, safety and drone policy provisions. Current FAA spending authority lapses July 15, the same day that both chambers are scheduled to depart for a seven-week recess.

Offshore leasing. The House Natural Resources Energy and Mineral Resources Subcommittee plans a hearing Wednesday on HR 5577, a bill to amend the Outer Continental Shelf Lands Act to allow the Interior secretary to conduct offshore oil and gas lease sales over the Internet. Such online sales could cut down on protests by anti-drilling activists.

Debt, equity definitions. The Joint Committee on Taxation plans a briefing Wednesday by Mark Mazur, assistant secretary of the Treasury for tax policy, and Robert Stack, deputy assistant Treasury secretary for international tax affairs, on the Treasury’s proposed regulations aimed at defining debt and equity. “Members on both sides of the aisle have expressed concerns regarding the Treasury Department’s proposed regulations and their impact on our economy,” the joint committee’s Chairman, Sen. Orrin Hatch (R-Utah) and Vice Chairman, Rep. Kevin Brady (R-Texas), said in a statement.

SNAP/food stamps. The House Agriculture Committee on July 6 will hold a hearing on error rates and anti-fraud measures in the Supplemental Nutrition Assistance Program July 6. The following day, the panel will examine agriculture and national security.

The focus on 'Brexit' continues, but markets appear to have become adjusted to the idea, letting other factors come back into play relative to market direction. And there will be some key updates in the holiday-shortened week ahead, especially on Friday. With Monday's holiday, markets and government offices are closed. But when folks come back to work, Tuesday will bring the Factory Orders update, followed by Wednesday releases on International Trade and the PMI Services and ISM non-manufacturing indices. Thursday's releases are in a way linked to Friday as they include the ADP private sector jobs report and weekly jobless claims. All that sets the stage for the June Employment report where the focus will be on whether or not the jobs market recovered from the downbeat May report. Plus, the May figure will get revised and markets will be attentive to which direction the data moves. Also out on Friday: Consumer Credit. All points to a week where "Brexit" should still move further back from being the main focus for a host of different markets – from financials to energy.

There will be some Fed appearances ahead, with a key voter offering up remarks at two different appearances. New York Fed's Dudley will appear both Tuesday and Wednesday and his remarks often are viewed as key given his status on the Fed as a voter. Also on the docket will be Fed. Gov. Tarullo whose remarks typically focus on regulatory issues. But any comments about "Brexit" could be of note. But one of the key items for Fed watchers will be the June FOMC minutes. After traders were surprised by details in the minutes from a prior Fed meeting, they will be on heightened alert for the recap of the June session to see if there are any "surprises" lurking in that document compared to what they learned following the conclusion of the June 15-16 session.

Weather will return as a factor after the holiday weekend, as traders will probably have mostly "digested" the USDA Acreage and Grain Stocks data. Growing conditions and weather outlooks as corn gets closer and closer to pollination will return as a focal point for traders. That will make the Crop Progress update on Tuesday (delayed a day by the Monday holiday) rather important to kick off the week. Wednesday will bring the update on ag trade where the focus will be on whether US agriculture registered another trade deficit for May. If so, that would mark three straight months with trade red ink. The week closes out with the Weekly Export Sales report on Friday (also delayed a day by Monday's holiday). That update will need to show demand continuing for US ag commodities from foreign buyers for traders expecting that to be key in soaking up supplies of US corn, soybeans and wheat.


NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws.