The Fed holds its two-day June meeting next week, and at one point that meeting was viewed as a possible launch point for rate hikes. But soft economic reports pushed back expectations, to the point where some Fed watchers had expected even September would be too soon. The positive May jobs report helped changed that view.
"If I were in their position, I would want to get a rate hike on the table to send a message that we're in the process of tightening. Then what the Fed is going to likely do is stay data dependent, and keep everyone off balance," said BMO Private Bank CIO Jack Ablin.
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Besides the jobs report, there are wholesale inventories at 10 a.m. and the NFIB small business survey at 7:30 a.m.
The Treasury also auctions $24 billion 3-year notes at 1 p.m. The 3-year was yielding 1.059 percent in late trading, while the 10-year was yielding 2.38 percent.
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"It shouldn't be crazy eventful, but we definitely want to see how investors will react to that sector of the market. It's an interesting spot. If you did see a real flattening of the curve and a real Fed liftoff, that section of the curve should come under pressure. It was the best issue on the curve today," said Justin Lederer, rates strategist at Cantor Fitzgerald.
The stock market sell off Monday was not steep, but there was some nervousness because the Dow turned negative for the year, and the S&P 500 fell below its 100-day moving average for the first time since April. The Dow was off 82 at 17,766, and the S&P 500 was off 13 at 2,079.
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The Dow transports were down sharply, losing 2 percent. "That's not a good sign," said Ablin.
"I just think valuations is a real problem and the only way I can see us really rallying here is if we got a nice surge in economic activity or we could actually see some inflation, which would probably benefit stocks too. To me, we just need to rely on the fundamentals. If they cooperate, I think we'll do fine," Ablin said.
"The best news we could see is if we could get some inflation," said Ablin.
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What to Watch
JOLTs, or the Job Openings and Labor Turnover survey is released at 10 a.m. ET.
Wholesale inventories are expected to show a 0.2 percent gain when they are released at 10 a.m.
The NFIB small business optimism survey is issued at 6 a.m.
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MSCI at 5 p.m. reveals whether China A-shares will be eligible for inclusion in its emerging market index.
The Treasury auctions $24 billion in 3-year notes at 1 p.m.
Earnings are expected from Lululemon Athletica, Hovnanian, Quiksilver, Burlington Stores, HD Supply Holdings and Greif.
General Motors annual meeting is at 8:45 a.m., and Tesla holds its annual meeting at 5 p.m.