Weekly Trader's Outlook

If you read last week's blog you might recall that my forecast for this week "Slightly Bullish," noting the encouraging technical setup. Fortunately for the bulls, the SPX pushed off support at the 200-day SMA this week and the index is higher by more than 1% at the time of this writing, so my forecast turned out to be accurate. In addition to the supportive technicals, President Donald Trump agreed to extend EU trade talks at the beginning of this week after threatening to raise tariffs by 50% last Friday due to a lack of progress in negotiations. Elsewhere, Treasury yields cooled off this week following some recent poorly received bond auctions, both in the U.S. and Japan, which was net bullish for stocks. Lastly, the economic data was largely positive, highlighted by this morning's cool inflation data from the monthly PCE report (more on this in the "Economic Data, Rates & the Fed" section below). However, stocks are lower today after President Trump accused China of violating its trade truce with the U.S. early this morning. Trump posted on Truth Social, "The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!". Trump did not identify the specific violations, but U.S. Trade Representative Jamieson Greer told reporters that China had not removed non-tariff barriers as agreed upon under their deal. Another important trade development this week came from a ruling from the Court of International Trade that Trump's reciprocal tariffs represent an "improper abdication of legislative power" and are unconstitutional. The Court of Appeals subsequently accepted an appeal from the White House and granted a stay on the order while the court "considers the motions paper." Therefore, trade relations remain top of mind for markets, and there remains a lot of uncertainty around the potential economic impact of tariffs, but the market reaction towards trade-related headlines has been much more muted recently versus last month.

At the time of this writing (2:30 p.m. ET), stocks are lower across the board, but well off the lows of the session (DJI - 8, SPX - 19, COMP - 152, RUT - 7). I find it a bit surprising that stocks are holding their ground relatively well given the potential for degradation in trade relations between the U.S. and China. I'm not entirely sure what President Trump meant by posting "So much for being Mr. Nice Guy," but at face value that seems to suggest at least the possibility of getting a trade-related escalation, but markets appear to be taking it in stride. The technicals are a bit more in the "neutral" camp heading into next week, as the SPX undergoes some continued digestion of recent gains (more on this in the "Technical Take" section below). Also, with Nvidia earnings behind us now, and earnings season wrapping up, there doesn't appear to be a lot of catalysts to push stocks higher next week [the Federal Reserve's Federal Open Market Committee (FOMC) meeting is the following week]. Yes, we will be getting the monthly employment report next Friday, but in my view the potential for a negative surprise (low jobs print or higher unemployment rate, for example) seems greater than a positive surprise. Therefore, my forecast for next week is "Neutral to Slightly Bearish," driven by continued consolidation of recent gains. What could challenge my outlook? The most likely culprit would be an unexpected trade-related escalation, which would make a full "bearish" outcome more likely.

Other Potential Market-Moving Catalysts:

Economic:

• Monday (6/2): Construction Spending, ISM Manufacturing Index
• Tuesday (6/3): Factory Orders
• Wednesday (6/4): ADP Employment Change, EIA Crude Oil Inventories, ISM Services, MBA Mortgage Applications Index
• Thursday (6/5): Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Productivity – Revised, Trade Balance, Unit Labor Costs
• Friday (6/6): Average Workweek, Average Hourly Earnings, Consumer Credit, Nonfarm Payrolls, Unemployment Rate

Earnings:

• Monday (6/2): Campbell's Co (CPB), Science Applications International Corp. (SAIC), Credo Technology Group Holdings Ltd. (CRDO)
• Tuesday (6/3): Ferguson Enterprises Inc. (FERG), Dollar General Corp. (DG), NIO Inc. (NIO), Ollie's Bargain Outlet Holdings Inc. (OLLI), Signet Jewelers (SIG), CrowdStrike Holdings Inc. (CRWD), Hewlett Packard Enterprise Co. (HPE), Guidewire Software (GWRE), Asana Inc. (ASAN)
• Wednesday (6/4): Dollar Tree Inc. (DLTR), Webster Financial Corp. (WBS), Thor Industries Inc. (THO), MongoDB Inc. (MDB), Five Below Inc. (FIVE), PVH Corp. (PVH), Argan Inc. (AGX), Verint Systems Inc. (VRNT)
• Thursday (6/5): Ciena Corp. (CIEN), Brown-Forman Corp. (BF/B), Victoria's Secret &Co. (VSCO), Cracker Barrel Old Country Store Inc. (CBRL), Broadcom Inc. (AVGO), Lululemon Athletica Inc. (LULU), Samsara Inc. (IOT), Rubrik Inc. (RBRK)
• Friday (6/6): no reports

There was a moderate dose of economic data this week and it was mostly good news for the bulls. This morning's monthly personal consumption expenditures (PCE) report was benign, roughly in line to slightly cooler, though still above the Fed's 2.0% target. Consumer confidence also improved, likely buoyed by the recovery in the stock market and a calmer trade/tariff environment. However, one economic soft spot was the Initial Weekly Claims, which came in at a one-month high. Here's the breakdown from this week's reports:

• PCE Prices: Headline month-over-month (MoM) increased 0.1% (in-line with estimates), bring the year-over-year (YoY) rate to +2.1% (0.1% below expectations), which represents the lowest level this year.
• Core PCE Prices: MoM increased 0.1% (in-line with estimates), bringing the YoY gain to +2.5% (0.1% below estimates).
• Personal Income: +0.8%, well above the +0.3% expected.
• Personal Spending: +0.2%, below the +0.4% expected.
• Chicago PMI: Dropped to 40.5 from 44.6 in the prior month, and well below the 45.0 expected.
• Durable Orders: -6.3% vs. -7.5% expected.
• Durable Orders: +0.2% vs. +0.1% expected.
• Consumer Confidence: Jumped to 98.0 in May from 86.0 in the prior month and above the 86.3 economists had expected.
• University of Michigan Consumer Sentiment: Was unchanged at 52.2 in May from the prior month, but above the 50.6 economists had expected.
• Initial Jobless Claims: Increased 14K from the prior week to 240K, and above the 230K expected. Continuing Claims increased 26K from last week.to 1.919M.
• The Atlanta Fed's GDPNow "nowcast" for Q2 GDP was revised up to +3.8% today from +2.2% on May 27th. The increase was primarily driven by the contribution of net exports to Q2 GDP.

Last Thursday yields on the 30-year U.S. Treasury were flirting with fresh cycle highs but, fortunately for the equity bulls, Treasury yields cooled down across the board this week. Compared to last Friday, two-year Treasury yields eased ~9 basis points (3.90% vs. 3.993%), 10-year yields moved down ~10 basis points (4.40% vs. 4.509%), while 30-year yields slid ~11 basis points (4.921% vs. 5.031%).

Expectations around potential rate cuts from the Fed turned back up this week, primarily driven by this morning's cooler-than-expected PCE report. Per Bloomberg, while expectations for a 25 basis point cut at the June FOMC meeting are unchanged at ~5%, the total 2025 expected 25-basis-point cuts are up to 2.17 from 1.92 (both on a week-over-week basis). 

Last week I noted the SPX's technical "throwback" to its 200-day Simple Moving Average (SMA) and support kicked in this week, meaning the index bounced off this indicator, which is what you want to see if you are bullish. However, the SPX failed to make a "higher high", which makes the bounce a little more suspect. At this point, it appears the index is in a period of consolidation, likely between 5,785 and 5,965, but we can't be certain. Therefore, we'll have to let time dictate direction, but a move above the recent high (~5,695) would be considered bullish, and a drop below 5,785 (the 200-day SMA) would be considered bearish.

Near-term technical translation: intermediate-term bullish, near-term neutral

Last week I noted that the Dow Jones Industrial Average (DJI) was in a more tentative/bearish technical state compared to the SPX and placed it in the "show me" camp regarding transcending resistance at the 200-day SMA. Unfortunately for the bulls, the $DJI remains below the 200-day SMA, but on a slightly more bullish note the index isn't rolling over either. Regardless, my near-term technical view is slightly bearish until proven otherwise.

Near-term technical translation: cautious/slightly bearish

Earlier this week U.S. President Donald Trump's company which operates his Truth Social platform, Trump Media & Technology Group (DJT + $0.48 to $21.31), announced plans to raise about $2.5B from institutional investors to buy Bitcoin, according to The Wall Street Journal. DJT said it plans to sell ~$1.5B in DJT stock and ~$1B in convertible debt to purchase Bitcoin and hold the asset on its balance sheet. Commenting on the move, DJT Chief Executive Devin Nunes stated, "We view Bitcoin as an apex instrument of financial freedom, and now Trump Media will hold cryptocurrency as a crucial part of our assets."

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP), and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, stocks climbed slightly higher this week and market breadth modestly improved as a result. On a week-over-week basis, the SPX (white line) breadth ticked up to 50.00% from 49.40%, the CCMP (blue line) improved to 34.41% from 33.10%, and the the RTY (red line) moved up to 32.67% from 29.92%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.

This Week's Notable 52-week Highs (46 today): Automatic Data Processing Inc. (ADP + $0.51 to $324.63), British American Tobacco Industries (BTI + $0.03 to $45.00), Dycom Industries Inc. (DY + $1.53 to $229.87), GE Vernova Inc. (GEV + $1.92 to $473.09), Netflix Inc. (NFLX + $4.47 to $1,189.33), Zscaler Inc. (ZS + $19.57 to $270.68)

This Week's Notable 52-week Lows (54 today): Alexandria Real Estate Equities (ARE - $0.72 to $70.53), Arbor Realty Trust (ABR - $0.17 to $9.67), Century Communities Inc. (CCS - $0.56 to $52.40), Helmerich & Payne (HP - $0.01 to $15.30), Nabors Industries (NBR - $0.40 to $26.01), Walker & Dunlop (WD - $0.50 to $68.50)