The futures market is looking like it is still on holiday, as there is little change across the board. Nevertheless, relative to fair value, little change is still setting up the cash market for a modestly higher start.
It should surprise no one that trade matters are at the center of headline attention coming off the Memorial Day weekend. It should also surprise no one that there isn't any good sense of a deal being struck soon.
There was the generic declaration from President Trump that he expects a great trade deal with China to come together in the future, yet that view was conjoined with the acknowledgment that the U.S. is not ready to make a deal with China and that the amount of tariffs could "go up very substantially."
China for its part is reportedly not going to give ground on its core economic interests (e.g. subsidizing state-owned enterprises).
So, in terms of the U.S.-China trade issue, it continues to be a cry of stalemate as opposed to checkmate. That's possibly why the futures market isn't too riled up about this news right now, because the "new" news sounds like the "old" news of prior weeks, which has already been weighing on the market.
For good measure, there wasn't a trade deal struck with Japan during the president's trip there either; and there is a Bloomberg article indicating Japanese officials have denied reports a trade deal with the U.S. could be completed by August.
Entering this week, the S&P 500 is down 4.1% in May while the Nasdaq Composite, S&P Midcap 400 Index, Russell 2000, and Dow Jones Industrial Average are down 5.7%, 5.5%, 4.9%, and 3.8%, respectively.
Despite the impasse on trade deal matters, there are some M&A deals getting done.
Global Payments (GPN) is acquiring Total System Services (TSS) in a $21.5 billion stock deal that has the payment technology industry abuzz. Separately, Fiat-Chrysler (FCAU) has proposed a merger of equals with Groupe Renault, which is placing a spotlight on the auto industry.
The spotlight continues to shine on the Treasury market, where yields continue to compress across the curve as growth concerns fester on the back of the trade standoff, political uncertainty in Europe, and the recent setback in the stock market among other things.
The yield on the 10-yr note has fallen three basis points to 2.29%, which is a 19-month low. Even so, that is a whopping 244 basis points above the -0.15% yield on the 10-yr German bund, which is just five basis points from its record low seen in mid-2016.
These interest rate moves will continue to be a focal point for equity buyers and sellers alike. They are one more piece of an increasingly challenging jigsaw puzzle for the stock market, which has been challenged this month to fit the pieces together in a straightforward manner like it used to do.