Today is the last trading day of the second quarter. Regrettably, it won't be the last day that we are talking about the G-20 meeting. Monday probably won't be either, as the outcome of the Saturday meeting in Japan between Presidents Trump and Xi will reverberate for some time.
The stock market continues to cling to the belief that the two leaders will at least agree to halt the implementation of any new tariffs and concede to engage in ongoing trade negotiations. That is the reported consensus opinion anyway.
If that is the consensus, then there shouldn't be an outsized reaction on Monday if that is indeed the framework of an agreement the two leaders make at their meeting. The outsized reaction would be triggered by any agreements -- or lack thereof -- that fall outside that framework.
CNBC said this morning it has talked to a Senior White House official who is expecting a trade truce at the G-20 meeting and that it is a working assumption within the White House.
You never know, though, what you are going to get.
It's possible things could go better than expected, yet it's also possible things could go worse than expected. Hence, the market for the most part this week has been in a consolidation mode, weighed down slightly by some modest selling interest into the end of June, which has been tracking toward the best June for the S&P 500 since 1955!
Entering today, the S&P 500 is down 0.9% for the week, up 6.3% for the month, and up 16.7% for the year.
Today's start is expected to be a positive one. Currently, the S&P futures are up eight points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 12 points and are trading 0.2% above fair value. The Dow Jones Industrial Average futures are up 95 points and are trading 0.4% above fair value.
Some of the uplift will be attributed to optimism about a potential trade truce; some of it will be attributed to quarter-end window dressing; and some of it will be attributed to the expected leadership of the financial sector, which is headed higher after the Fed said it had no objections to capital return plans proposed by the largest institutions, including JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), and Goldman Sachs (GS).
Those stocks are all indicated higher, which will offer influential support for the major indices.
The Personal Income and Spending Report for May has also provided some support, having shown a pickup in income and spending, as well as muted inflation pressure.
Specifically, personal income increased 0.5% m/m (Briefing.com consensus 0.3%) and personal spending rose 0.4% (Briefing.com consensus 0.4%) following an upwardly revised 0.6% increase (from 0.3%) for April. The PCE Price Index was up 0.2% (Briefing.com consensus 0.2%) and so was the core PCE Price Index, which excludes food and energy (Briefing.com consensus 0.1%).
The key takeaway from the report is that there wasn't an acceleration in the yr/yr growth rate for either the PCE Price Index, which dipped to 1.5% from 1.6%, or the core PCE Price Index , which held steady at 1.6%. That will help maintain the stock market's belief that a rate cut is coming at the July 30-31 FOMC meeting.
In other developments, Dow component Nike (NKE) is trading modestly lower in pre-market action after the athletic footwear and apparel company came up shy of the quarterly consensus EPS estimate for the first time in seven years. Nike, however, offered some relatively reassuring guidance for fiscal 2020, including an outlook for gross margin expansion.
Today isn't going to be lacking in attention to the G-20 meeting, and it certainly isn't going to be lacking in volume as it will also include the annual rebalancing of the Russell indexes at the close.
Overall, though, the rebalancing that matters most in the market's mind is the one it hopes to see between the U.S. and China following the G-20 meeting.