'Ceasefire' Gives Markets Hope, Tesla Rides on Robotaxi, Charting a Possible New Day 1
Also, let's check those yields, trade talk progress with Japan, Fed chatter and more.
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By now readers have seen where U.S. equity index futures are trading. And I am sure that readers have seen how Asian markets are performing and how European markets have opened. There has clearly been a "risk-on" atmosphere that has permeated global financial markets overnight. It happened on Monday evening for those on the East Coast of North America. In a post on social media, Pres. Trump wrote that a "complete and total" ceasefire between Israel and Iran would go into effect once the two nations had completed final missions already underway. That was expected to occur about six hours later, or around midnight, Washington, D.C. time.
A short while later, Vice Pres. JD Vance appeared on Fox News and said, "When I left the White House, I thought we might be able to get it (the ceasefire) across the finish line before this broadcast, and it looks like the president has been able to do that." Before long, Reuters reported that an Iranian official had confirmed that Tehran had agreed to end hostilities and the Wall Street Journal (among others) reported that Israel had confirmed the ceasefire. At 1:08 ET, Pres. Trump posted that the ceasefire was then in effect. The president added, "PLEASE DO NOT VIOLATE IT!"
Violation?
Israel claimed that Iranian missiles launched toward Israel had been detected after the ceasefire had been in effect, vowing to "respond with force." Iranian state media has denied firing any weapons since the ceasefire had begun. Despite this concern, as we work our way through the zero-dark hours on Tuesday morning, financial markets appear to be quite comfortable with the fact that Pres. Trump had brokered the end of hostilities between Israel and Iran and that this ceasefire might hold.
That's Not All ...
There's more to the overnight rally than the potential for an end to the war in the Middle East. Reuters is reporting that Japan is working on setting a time for the next level of cabinet-level trader talks with the U.S. There appears to be some urgency to get these talks across the finish line ahead of President Trump's July 9 deadline.
It's Also About Yields
Anyone else notice that yields are coming in, signaling increased demand for U.S. Treasury debt securities? We all know that Fed Chair Jerome Powell has been playing games with his inconsistent view of just how important data-dependency is when setting monetary policy. For that reason, last Friday, Fed Gov. Christopher Waller, a first-term Trump nominee to the Fed's Board of Governors, appeared to "audition" for the top job at the Fed, speaking of how the July 30th Federal Open Market Committee meeting should be a live one as far as the potential for a rate cut is concerned.
On Monday, Waller found an ally. Fed Gov Michelle Bowman, who is historically hawkish, spoke publicly on Monday and said, "Should inflation pressure remain contained, I would support lowering the policy rate as soon as our next meeting (July 30th) in order to bring it closer to its neutral setting and to sustain a healthy labor market." Bowman was also a Trump nominee to the Board of Governors.
Elsewhere, Chicago Fed Pres Austan Goolsbee added, "If we do not see inflation resulting from these tariff increases, then, in my mind, we never left what I was calling the golden path. If the dirt is out of the air, then I think we should proceed."
While that sounds a little ridiculous, it does appear that Goolsbee who does vote on policy this year and is considered by many to be a "perma-dove" is possibly aligned with Govs. Waller and Bowman.
Marketplace
On Monday, the S&P 500 popped for a gain of 0.96%, as the Nasdaq Composite moved ahead by 0.94%. Among major and mid-major indices, the Dow Transports led the way at +2.25% as Avis Budget CAR soared 9.34% followed by United Airlines UAL at +3.64%. Small caps out-performed as well with the S&P 600 up 1.22% and the Russell 2000 up 1.11%.
Ten of the 11 S&P sector SPDR exchange-traded funds closed out the Monday session in the green as nine of these funds gained at least 1% for the day. Consumer Discretionaries XLY had the hot ticket on Monday, led by Tesla TSLA at +8.23%. Tesla was hot as the firm's robotaxi service in Austin, Texas became a reality. Energy XLE was the lone loser on Monday, much to the surprise of many, down 2.53% as WTI Crude fell more than 8% for the day.
A New Day One?
Maybe. Take a look at this:
On Monday, we wrote to you that the equity market uptrend was technically still in effect, despite the emergence of a potential Double-Top pattern of reversal pictured here. Now, take a look at Monday. The S&P 500 rallied off of the 21-day exponential moving average, but has not yet taken out the apex of the second top. Maybe today? Maybe.
The bulls were very strong on Monday, though. Winners beat losers by more than 2 to 1 at the NYSE and by more than 4 to 3 at the Nasdaq. This was after opening on weakness. Advancing volume took a 63% share of composite Nasdaq-listed trade on Monday and a 59.8% share of composite NYSE-listed activity, as well. Again, the bulls really did not show up until lunchtime. so there was some brute strength here.
What About Trading Volume?
Well, here is where one might think they see "the catch." Aggregate trade was down 24.9% on a day-over-day basis across NYSE-listings, down 8.8% across Nasdaq-listings and down sharply across the membership of the S&P 500. So, price discovery was not that meaningful?
Au contraire, my friend. For Friday was a "Triple-Witching" expirations event and much of the trading volume was forced. On Monday, trade across NYSE-listings was up 9.6% from Thursday's levels, and up 16.2% across Nasdaq-listings. Additionally, on Monday, aggregate trade across the membership of the S&P 500 printed 12% above the 50-day trading volume simple moving average for that index.
So, was Monday a new Day One? Well, it does appear that Monday reversed a week-long downtrend and that trading volume was elevated. This may not be a technical "Day One" but the impact on the investor psyche may just be the same. The bulls are on the run. Now, if we can get these people in the Middle East to just not shoot at each other.
Economics
(All Times Eastern)
8:55 a.m. - Redbook (Weekly): Last 5.2% y/y.
9:00 - Case-Shiller HPI (Apr): Expecting 4.1% y/y, Last 4.1% y/y.
9:00 - FHFA HPI (Apr): Expecting 0.1% m/m, Last -0.1% m/m.
10:00 - CB Consumer Confidence (Jun): Expecting 99.1, Last 98.0.
10:00 - Richmond Fed Manufacturing Index (Jun): Expecting -7, Last -9.
4:30 p.m. - API Oil Inventories (Weekly): Last -10.133M.
The Fed (All Times Eastern)
09:15 - Speaker: Cleveland Fed Pres. Beth Hammack.
12:30 p.m.- Speaker: New York Fed Pres. John Williams.
2:05 - Speaker: Boston Fed Pres. Susan Collins.
4:00 - Speaker: Reserve Board Gov. Michael Barr.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: CCL (.24), SNX (2.75)
After the Close: AVAV (1.41), BB (.00), FDX (5.85)
At the time of publication, Guilfoyle was long BB equity.
