Debt ceiling drama is back and it's coming for markets. Here's what to know as a deadline looms.

Good morning, market watchers. I'm senior editor, Max Adams, standing in for Phil Rosen today. 

Earnings season continues apace, with a big week for first-quarter results rolling on. As of yesterday, S&P 500 companies were cruising toward their best start to an earnings season since 2012. However, S&P 500 futures are sharply down this morning. 

If the trend returns to the upside, it'll buck many of the gloomiest predictions of a crushing earnings recession and a painful stock market sell-off — at least for now. Some of Wall Street's biggest bears are still adamant that more pain is in store and earnings will see deep cuts this year. We shall see.

Today we're turning our attention to a frustratingly frequent dilemma: the debt ceiling.  

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1. The debt ceiling impasse is starting to catch the eye of investors. About as reliable as death or taxes (which were due yesterday, by the way), US politicians are once again wrangling over raising America's debt limit. 

Failing to do so would mean the country would be forced to default on some debts, a scenario that could materialize sometime between July and September, according to the Congressional Budget Office. 

But the deadline could arrive even sooner, as early as June, if tax collections remain as "weak" as they have been so far in April, Goldman Sachs says. The bank on Tuesday warned that the government could "bumble" into the country's first default if President Joe Biden doesn't sit down and negotiate with Republicans. 

While Biden has angled for a no-strings-attached deal to raise the country's borrowing limit, Republicans are looking for stipulations like banning student loan forgiveness and making it harder to qualify for food stamps. Failure to reach an agreement could have dire consequences for millions of Americans in the form of rising debt costs and threats to Social Security benefits. 

Last week, markets started showing early signs that investors are stressed about a possible US default as the deadline looms without an agreement in sight. Five-year credit default swaps on US debt hit their highest price since 2012. 

Meanwhile, demand for short-term US Treasury bills that mature this summer ticked down, suggesting investors are nervous about the government's ability to keep paying its debts as the deadline gets closer. 

Sensing that he might have an ally in markets, which would likely be rocked in the event of a US default, Speaker of the House Kevin McCarthy appeared at the New York Stock Exchange this week, urging investors to add their voice to the debate.

"If you agree, don's sit back — join us. Join us in demanding a reasonable negotiation, a responsible debt ceiling, an agreement that brings spending under control" McCarthy said. His remarks came as the US sold $57 billion three-month Treasuries at the highest yield since 2001. 

It is worth noting that this "crisis" looms over markets and the economy very frequently, and about a decade ago, Wall Street thought it had found a solution for lawmakers: simply go ahead and default. 

What's your prediction for the debt ceiling impasse this time around? Will lawmakers strike a deal before the deadline? email me (madams@insider.com) to let me know. 

In other news:

2. US stock futures fall early Wednesday, as investors continue to watch the latest round of earnings reports to measure corporate health. Here are the latest market moves.

3. On the docket: Tesla, Morgan Stanley, and IBM, all reporting. 

4. Goldman Sachs says this batch of high-dividend paying stocks has the best shot to outperform in a slowing economy. The investment bank recommended stocks that prioritize big dividends and big share buybacks. Check out Goldman's list of 21 stocks here. 

5. Wall Street is getting its recession calls wrong. That's according to St. Louis Fed President James Bullard. Speaking with Reuters on Tuesday, Bullard said that it is hard to predict a recession in 2023 when a strong labor market and consumer spending will fuel further growth. Read his outlook for the US economy. 

6. AI is getting better at parsing Fedspeak and making stock predictions. Two papers out recently suggest that ChatGPT can decipher the dense prose of central bankers about as well as a human being, while the bots are also getting better at predicting stock moves based on company news. Here's what the researchers found. 

7. Here's why Morgan Stanley's Mike Wilson doesn't believe in the latest stock market rally. The bank's top stock strategist is still bearish amid a strong run of gains in 2023. Wilson's prediction is for earnings to fall rapidly as "revenue growth is the next shoe to drop."

8. Visualize the credit crunch with these charts. The tightening of financial conditions in the wake of the SVB disaster in March is already being felt. These six charts show how banks are pulling back on lending as they try to navigate heavy deposit flight. 

9. Bank of America has hand-picked a list of small-cap names poised to beat earnings. Analysts said that the economy has entered the final, deeper stage of the downturn, and there are specific kinds of stocks that perform best in this period. Read the bank's list of 23 recommendations here. 

10. Here is why Apple could benefit from Samsung booting Google from its phones in favor of Bing. Bank of America estimates that Apple receives $20 billion from Alphabet for its search partnership. "The rise of Microsoft as a potential alternative to Google gives Apple bargaining power to better monetize…over 2 billion Apple devices."

Curated by Max Adams in New York. Feedback or tips? Email madams@insider.com.

Edited by Jason Ma (jma@insider.com) in Los Angeles and Hallam Bullock (@hallam_bullock) in London.