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The Monday Market Minute

  • Global stocks slip modestly lower as investors take a cautious tone heading into the final trading days of the first half of the year.
  • Rising Delta variant infections in Asia keep risk markets in check, while mixed signals from U.S. bond markets continue following last week’s PCE inflation data.
  • 2-year notes trade at 0.265%, just north of the Fed’s 0% to 0.25% target range, suggesting rate hike’s inside its 2023 timetable. 
  • Lawmakers indicate support for a $1.2 trillion infrastructure bill after President Biden backtracks on threat to reject it. 
  • CDC data shows 153 million Americans have now been fully vaccinated against the coronavirus, with around 323.3 million doses administered as of Thursday.
  • U.S. equity futures suggest a modestly higher open on Wall Street heading into the final week of the first half of the year, headlined by June payroll data on Friday.

U.S. equity futures traded modestly higher Monday, although stocks around the world kick-off the week in a cautious mood amid mixed signals from the bond market and a worrying rise of Delta variant coronavirus infections in Asia.

Last week’s record highs on Wall Street extended a 279-day run of gains for the S&P 500 without a 5% pullback, the longest streak in more than three years, even as inflation data continues to test multi-decade highs and benchmark 2-year note yields trade north of the Federal Reserve’s target range of 0% to 0.25%, suggesting a first rate hike that’s inside the Fed’s 2023 timetable.

However, continued support in the form of $120 billion in monthly bond purchases has kept 10-year note yields right around the 1.5% market, creating a mixed set of signals that are starting to unsteady investors heading into the second quarter earnings season.

Last week’s bi-partisan agreement on a $1.2 trillion stimulus bill, which could being working its way through Congress later this week, has assuaged some concerns that the Fed is ready to pull back support, while a predicted 64% increase in second quarter S&P 500 profits should underpin bulls heading into the second half of the year.

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For the moment, however, rising Delta variant infections in Asia is a more pressing concern, with fresh stay-at-home orders issued in Sydney and extended lockdowns in Malaysia and Thailand underscoring the breadth of the new outbreak in the region. 

That has U.S. stock futures in a muted mood Monday, with contracts tied to the Dow Jones Industrial Average indicating a modest 5 point gain and those linked to the S&P 500 priced for a 5 point advance.

The tech focused Nasdaq, meanwhile, looks set for a 30 point opening bell gain on the strength of pre-market move for Apple  (AAPL) – Get Report and Micron  (MU) – Get Report

Oil prices were also trading cautiously, with modest declines on the session following a fifth consecutive week of gains, as investors looked to this week’s OPEC+ meeting in Vienna for clarity on the cartel’s output plans heading into the second half of the year.

WTI futures for August delivery were marked 2 cents lower from Friday’s close in New York at $74.07 per barrel while Brent contracts for the same month slipped 7 cents to $76.11 per barrel.

In Europe, stocks drifted lower, pulling the Stoxx 600 into a 0.24% decline, while Britain’s FTSE 100 was marked 0.44% lower in the opening hours of trading in London.

Overnight in Asia, infection concerns kept risk markets in check, with the Nikkei 225 falling 0.06% in Tokyo and the region-wide MSCI ex-Japan index essentially unchanged heading into the final hours of trading.