Monday Takeaways: $323 Billion Up for Grabs

Shah Gilani|June 24, 2024

“You can’t always get what you want…”

The markets ended last week mostly flat… but you know what?

We can’t always hit new high after new high.

And I’m ok with that. I’m still bullish… and we’re still in an upward trend.

But this week might test the resolve of some investors.

There’s $323 billion up for grabs in the Treasury market. Whether the auctions go well or not… will tell us more about where interest rates are headed.

It’s a busy week of data… but there’s one thing that matters most this week. It will move the markets more than anything.

Click on the thumbnail below to get your biggest takeaway for the week.

Transcript

Hey, everybody. Shah Gilani here with your Monday Takeaways.

The big takeaway – I’ll just give it up at the very top here – is it’s going to be a busy week of data.

Last week, the takeaway was the markets made new highs and then ended the week rather boringly. We can’t make new highs all the time… but it was another good week.

We’re not going down. Even if we go flat a little bit, there’s nothing wrong with that.

Markets are getting a little overbought. S&P’s overbought. The Nasdaq 100 is overbought.

The Russell even performed somewhat last week. So, yeah, it’s good. There’s nothing bad out there. But this week might be a little bit of a struggle, and it really depends on the numbers.

So, right off the bat this week, Monday, today, we’ve got Treasury auctions… $70 billion of 13-week bills, $70 billion of 26-week bills.

Those auctions should go well because, as far as liquidity, the big banks, the dealers and the short bills go, there’s always strong demand for 26- and 13-week bills. I don’t think there’s going to be much of a problem with those.

Speaking of the big banks, we have big bank stress test results this week. We get those on Wednesday.

But back to the auctions…

On Tuesday, we have $69 billion of 2-years being auctioned.

On Wednesday, $70 billion of 5-years will be auctioned. And on Thursday, $44 billion of 7-years.

These auctions, considering the bond rally of late, are going to be important as to how they are received.

If they’re well received, and we see the 5- and 7-year bid up, then that’s an indication that investors are trying to grab some longer-term duration because they think rates are heading down.

Why would they be thinking rates are heading down? Because the Fed is not supposed to cut, or cut maybe once, maybe twice, but certainly not three or more times… or maybe they won’t cut.

So why would investors bid up bonds, especially those looking for some duration?

Maybe because they think the economy is actually slowing.

If they think the economy is going to slow, then they think rates are going to come down on their own, and the Fed won’t have to cut. But then if things slow enough, the Fed will cut, and so maybe we start to buy bonds now. We’ll see.

The 5-year and the 10-year, the yields are always going to be important. So is, of course, the 2-year yield and the curve.

Now, again, bank stress test results on Wednesday. I’m not expecting any surprises, but if we get some negative surprises… this market could sell off. Why?

Because maybe the banks are in trouble. We need to watch the stress test results on Wednesday.

The takeaway there is it’s going to be important in terms of the market’s reaction, which is always what matters.

The data matters. It matters because of that reaction to the data, because that then fills in the narrative, what the narrative thinking is about the data, and it’s more about the narrative than the data itself.

It’s how investors perceive the narrative and what they’re going to do about it psychologically. Will they buy or sell?

On Wednesday, we’ve got Micron (MU)’s earnings. That’s going to be interesting.

On Thursday, we have durable goods. We’ll see how we’re doing with durable goods. Our costs are going to be high. Durable good sales are going to be down.

Where are consumers? What is the long-term thinking in terms of how consumers are willing to commit their money?

We also have a revised GDP, the third revision for GDP for the quarter on Thursday.

And Friday, we got PCE.

It’s going to be a very, very busy week. Markets are – I wouldn’t say on edge – but they’re looking for direction.

And this week, they may get some. It may be such a mixed bag that we don’t get much direction this week.

I’m still positive on the market. I think you should be too… because the takeaway from what’s happened lately is the trend is your friend.

And until it changes, reverses, becomes negative, and the market starts to tumble, or we head toward a crash – that’s a big buying opportunity, by the way – then it’s all good… because it’s all good until it isn’t.

That’s your takeaway for today and it’s my favorite takeaway. Maybe all the time. It’s all good until it isn’t.

Catch you guys next week. Cheers.