The Morning Call
6/2/26
The
Market
Technical
Monday in the
charts.
Summary:
Strong signals from US Manufacturing surveys, combined with
higher oil prices (amid total headline chaos re:
US/Iran/Lebanon/Israel) pushed yields up, the dollar up, and gold and
bitcoin down bigly. Stocks were mixed with Nasdaq leading (Jensen's
comments reigniting AI love-fest) and S&P's 8th green day in a row (longest
streak in a year). hedge funds bought US stocks at the fastest pace in six
months last week, according to Goldman Sachs, but as Bloomberg's Simon
White notes, this belies a mixed picture that is not yet a full-blooded
endorsement of the rally. Speculators continue to get shorter across
equity futures (mini S&P, Dow and S&P 400, and Nasdaq 100 and
Russell 2000), according to Commitment of Traders data. The position of
leveraged funds and asset managers across equity futures is net long,
but getting less so (data as of Tuesday last week).
Monday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
Increasingly
uncomfortable beneath the surface.
Summary:
So, the overall takeaway is that the market has become more
convinced in AI, more concentrated in AI, more levered to AI, and increasingly
willing to pay for upside convexity rather than downside protection. Macro
fear has collapsed, but idiosyncratic risk has not… In fact, single-stock skew
is pricing the exact opposite.
Relentless retail.
Summary:
The flow data below corroborates that point: CTA (modest), Retail
(relentlessly) and Corporates (buybacks in full swing) are acting as sponsors
of equities, with little regard for concentration considerations, or
valuations.
Tuesday morning
setup: Futs are weaker but well off their overnight lows as the US is set to
lag its global peers; according to JPM investors will need to watch to see if
there is a beginning of a larger rotation similar to Jan-Feb or perhaps a
slight pullback following the US’s multi-week run. As of 8:00am ET, S&P
futures are down 0.2% after the artificial-intelligence trade fueled the
S&P 500’s longest winning streak in more than a year, with investors
gauging prospects for an end to the war in the Middle East. Nasdaq futures down
a fraction after clocking yet more records on Monday (driven by a surge in
Software stocks), as traders digest a barrage of AI news overnight while a
growing number of traders urge caution on market positioning and the technical
setup. In premarket trading the story remains Tech with HPE / MRVL both up
~25% and AVGO +6.5%, NVDA +1.8%. Industrials, Materials, and Utilities the
standout sectors. Technology stocks led gains in Asia overnight and are
doing the same in Europe where the Stoxx 600 climbs 0.7%. Overnight
macro news was quiet, and broader risk sentiment has also been helped
by Brent crude futures falling 1.6% to around $93 a barrel.
Treasuries advance, pushing US 10-year yields down 2 bps to 4.44%. Oil / Energy
prices are declining along with Ags as Metals are bid led by aluminum, copper,
and precious. US economic data calendar includes April JOLTS job openings at
10am; Fed speaker slate includes Hammack (8:30am) and Goolsbee (11pm).
Fundamental
Headlines
The Economy
US
April construction spending rose 0.4% versus
forecasts of +0.2%.
The May manufacturing PMI was 55.1 versus predictions
of 55.3.
https://www.advisorperspectives.com/dshort/updates/2026/06/01/sp-global-manufacturing-pmi-may-2026
The May ISM manufacturing PMI was 54.0 versus
estimates of 53.0.
International
The May EU flash
CPI was +0.1% versus expectations of +0.2%; the YoY flash CPI was 3.2%, in
line; the YoY flash core CPI was 2.5% versus +2.4%.
Other
A positive update from my favorite optimist.
http://scottgrannis.blogspot.com/2026/05/key-macro-charts-update-still-looking.html
A
deeper dive into the above manufacturing and construction numbers.
https://bonddad.blogspot.com/2026/06/manufacturing-expands-in-may-april.html
Overnight
News
The Trump
administration on Monday proposed a 25 percent tariff on a broad range of
Brazilian imports, concluding after a trade investigation that Brazil had
engaged in unfair practices that imposed burdens on American businesses.
The White House
will cut tariffs on agricultural equipment, such as combines and harvesters, to
15% from 25% on June 8. A lower 10% duty rate may apply if the equipment
contains at least 85% US steel or aluminum.
Gold has overtaken
US government bonds as the world’s top reserve asset following years of
relentless buying by central banks and a historic rally that has seen prices
nearly double over the past two years.
Monetary
Policy
The Fed does not
enable government spending. I don’t entirely agree with this notion. The
government sells Treasuries to the banks. The Fed then buys the Treasuries and
pays interest to the banks for holding the cash. So it enables the government
to expand at a cheaper price (interest rate).
Inflation
Warsh
wants the Fed to think differently about inflation.
The price of rice
(which feeds half the world) just posted its biggest monthly rise since 2008.
https://www.zerohedge.com/commodities/grain-feeds-half-world-just-posted-biggest-monthly-surge-2008
The
Dollar
The
dollar dominance is alive and well.
https://www.advisorperspectives.com/commentaries/2026/06/01/dollar-dominance-alive-well
AI
China’s AI heist.
https://www.foreignaffairs.com/china/chinas-ai-heist
The expected AI productivity boom is still waiting
for proof.
https://www.aei.org/economics/an-expected-ai-productivity-boom-is-still-waiting-for-its-proof/
The
Financial System
Federal
Reserve borrowings signal stability in the banking system.
Investing
Why multiples haven’t
declined despite the rise in rates.
https://www.tker.co/p/interest-rates-and-stock-market-valuation
The magnitude of
the numbers is mindboggling.
A recap of stocks’
performance in May.
https://talkmarkets.com/article/my-oh-my-what-a-month-of-may-1780336053
News on Stocks in Our Portfolios
What
I am reading today
Another
hurricane season is underway; what to know.
https://www.zerohedge.com/weather/another-hurricane-season-underway-what-know
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