Market Calm: Analyzing U.S.-China Trade Talks and Bond Auctions

Let's get to the big story breakdown.

All eyes are on London as trade talks continue between the US and China.

Meanwhile, Wall Street is watching this week's US bond auctions closely as investors push back against long-term government debt.

Now the Treasury will sell 2 $22 billion in 30 year bonds on Thursday, a routine move that's now drawing big attention.

Thirty-year yields recently hit a 20-year high.

The US will also offer $58 billion in 3 years.

Notes ahead of sales of 10 and 30 year debt later this week aside from bills, and the US Treasury will see a total of $119 billion.03 and 10 year notes.

Joining me this morning as we kick off the trading week is Michael Rankin, senior market strategist at the New York Stock Exchange.

Good morning, Michael.

Thank you so much for joining me.

Good morning.

Thanks for having me back on.

It's a one week break and I'm happy to be back.

Well, first and foremost, we are looking at a Quite a calm market for the futures this morning, and you and I were remarking on this, but of course the talks that are ongoing in London and the bond auctions.

So ahead of what's coming later this week, including the inflation figures, where are we right now when it comes to the markets?

Yeah, I mean, so it's sort of interesting.

It does feel like we've kind of got a little bit into this kind of summer trading.

We've seen volatility really.

Going to collapse over the last couple of months.

For the last few days we've looked at ranges in the S&P 500 that have been under 0.5%, which something which was like kind of unthinkable going back to kind of the April volatility that we've seen, right?

So you know markets are kind of in this kind of calm state right now.

We're waiting to hear what comes out of London obviously today we'll have today's 3 year auction, but I think that.

It'll be fine.

I think the bigger question is around the 10 and the 30s, as you sort of mentioned, you know, the markets seem to be more concerned about the longer term paper and then tomorrow we have CPI, you know, which is, you know, is going to be an important data point.

We're going to need to see, you know, if you see some of the kind of price increases, you know, companies putting through price increases, which will make the Fed's job a little bit harder and that'll lead us into kind of next week's Fed meeting.

Yeah, and speaking of which, we have that that meeting for June coming up, and expectations do call for no change in interest rates, but we did get that jobs report last Friday.

Now farm payrolls coming in better than expected, but hiring slowing and unemployment unchanged as well.

So in terms of where we stand for the broader US economy, the hard data, the soft data, where do you stand?

Yeah, so I mean I think last Friday's jobs report, the headline number was pretty.

Solid.

We did see some negative revisions.

The household survey was a little bit weaker, but overall, right, the the the labor market continues to be pretty resilient.

We are seeing a slowing in hiring, but I think what what that report did was really take off uh the the hope of a potential kind of rate cut by the Fed in the summer time frame.

We, you know, we had that week ADP jobs report, you know, ahead of that.

So, you know, there was.

I'm concerned that you'd see a downside number.

It came in a little better, and so you saw expectations for the first rate cut kind of pushed back into the fall, which is kind of where we were, you know, kind of before the start of the week.

I think we'll see tomorrow's tomorrow's CPI report.

There's a potential that I think you could see the housing side of things, help on the downside, help to on the downside and kind of.

Keep you can keep that CPI report a little bit subdued, but I think at this point the Federal Reserve has told you pretty consistently they're in a wait and see stance.

The data has done nothing to really suggest that they need to get more aggressive and so you know, I think, I think that's kind of where where where they are at this point.

And finally, I do want to ask you about the S&P 500 in terms of levels.

Last Friday we saw the index closed above 6000 and when we take a step back and look at the sectors that are the leaders versus the laggards, there might be a little bit of concern about potential concentration risk going forward.

So where do you stand in terms of levels you're watching and of course what we're seeing in the sectors.

Yeah, so I think you know with the S&P 500, we're holding right above 6000, you know, we've started to, you know, this is kind of the markets have gotten into like a really grindy sort of state, right, you as you've seen volatility compressed, you've started to see some of those kind of quantitative strategies that we've talked about putting capital back to work after they kind of you know.

Took off a significant amount of risk in that April time frame.

So that's helping to keep an underlying bid beneath the market.

I think when you look out, if that July time frame gets interesting because you have, you know, not only the big beautiful bill, you have the 90 day reprieve, you have earnings along with earnings, you also see that the buyback blackout window you kind of moves into effect.

So that takes away some of that underlying bid with the market.

It for the for the index itself, still watching that 200 day moving average, you know, which is down a couple percent from here, kind of high 5,700s, you know, the all-time high, we're about 2% away from that, you know, kind of, you know, around 6150, you know, so it's like that that's kind of like the range in the near term.

I think one of the more interesting things that I'm seeing in the market right now is a little bit of a shift and you're seeing somehow performance in the small caps.

I think part of that is, you know, kind of as um.

If you look at kind of historical performance leading into kind of a rate cut, rate cutting cycles, right, you tend to see kind of the small caps outperform in that time period.

So as markets are starting to kind of get ahead of the idea that we could see kind of rate cuts in the fall, you're starting to see a A little bit of outperformance in the small caps which have been big underperformers throughout the year.

OK, Michael, well thank you so much for joining me on this Tuesday morning and for giving us an overview of what we're seeing, especially since there are so many moving parts here.

Yeah, thanks for having me.

See you next week.

Thank you, Michael.