Perhaps on the narrowest of rallies from the tariff induced April lows, the narrative is rising that the recent rebound—described as the “mother of buy on dip”—is poised to be tested in the coming weeks.
The President’s 90-day extension on reciprocal tariffs is set to expire on July 9. And then there is “One Big Beautiful Bill.”
Most will acknowledge the markets are very overbought on a short-term basis and leadership is concentrated in a handful of technology stocks. Bloomberg writes that among the 11 S & P sectors, only three are showing strength. The percentage of S & P 500 members trading above their 200-day moving average “has not budged since early May.”
Yesterday’s economic data was regarded as mixed. Short dated Treasuries rallied as the market is now suggesting a distinct possibility of three interest rate cuts this year. Longer dated Treasuries were essentially unchanged as $1 trillion of additional debt must be originated by year’s end to mee the government’s unsatiable demand for funds.
Earnings season is about to commence. Most believe corporate America will offer concrete statements as to how they have grappled with tariff uncertainty including margin compression and market share battles.
Last night the foreign markets were up. London was up 0.54%, Paris up 1.35% and Frankfurt up 0.68%. China was down 0.70%, Japan up 1.43% and Hang Seng down 0.17%.
Futures are up about 0.25% on trade and monetary policy optimism. The 10-year is off 7/32 to yield 4.28%.
Kent Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.
