Monday's dead cat bounce didn't amount to much in terms of recovery on the NASDAQ and S&P following Friday's selloff.
The S&P recovered just more than 10% of Friday's losses, while the NASDAQ grabbed back about 20%. Since Friday's selling was, by and large, profit-taking rather than a mass fear episode, the market will likely recover on a more gradual basis, as opposed to the rapid rise of the prior few months.
While there are a number of negatives overhanging the market as a whole, Wall Street is quite adept at sidestepping or ignoring anything that stands in the way of greater and greater highs. It's been a little more than two months since the most recent correction, when the NASDAQ fell about 13% and the S&P lost nearly 10% between te end of January and the end of March, implying that another downturn is not likely to occur, even though valuations remain historically high, screaming, "sell me."
Nobody is listening, however. At this time last year, the Naz and S&P were already seeking a path higher, recovering from the tariff trauma in April. They would both eventually peak near the end of October. Over that period, the NASDAQ put on gains of over 40% while the S&P added an impressive 30%. Given the timeline of roughly nine months to a year between severe dips, Friday's one-day smackdown appears to be nothing of consequence near term. Get ready for short sellers to get sandbagged again.
Dispensing with the fear associated with large single day events, stocks, especially the chip sector which suffered the most damage last week, are poised to make up for lost time, with institutions remaining tied to momentum stocks. The public is probably going to join in on the dip-buying, sensing opportunity.
As Tuesday's open approaches, futures are talking a good game, with Dow futures ahead by 130 points, NASDAQ futures up more than 200, and S&P futures up nearly 30 points an hour prior to the bell.
Tuesday may come off as a good day to initiate positions, as everything will appear to lean positively. Wednesday and Thursday may see some turbulence with the release of May CPI and PPI, respectively. However, as is often the case, the market may take elevated inflation levels without nuance, especially if those readings are better than expected, meaning, they still stink, but not as badly as analysts had assumed. Of course, it's rubbish, but may provide enough of a practical narrative to keep stocks above water and end the week with gains.
It's not that markets are rigged to go ever higher, but the objective of Wall Street has always been to promote wealth accumulation via higher prices. Indeed, if inflation is truly an issue, it is almost certain to redound to stocks first.
On the fixed income side, Friday's slide may be said to have done more damage to the treasury market than it did to stocks as the yield on 10-year notes zoomed past 4.50% and the 30-year yield regained 5.00%. Heading into Tuesday's open, the 10-year is at 4.54% and the 30-year, 5.02%. The persistent theme of rising inflation is sending treasuries into empty space on the high side of the yield curve. With the Fed poised to begin hiking rates at some time in the near future to counteract inflation (though not at next week's meeting), the treasury market won't react until newly-installed Fed Chairman, Kevin Warsh, opens his mouth at the press conference podium. CME's FedWatch tool has the odds of no rate change to the Federal Funds Target Rate (3.50-3.75%) at 98.2%, the assumption being that Warsh will be moderately hawkish and may actually send a signal for rate hikes beginning in July. For now, it's a wait-and-see condition.
None of this is very good for precious metals. If interest rates are going to yield 3.75-5.25%, depending on maturity, holding PMs, which pay no dividend, doesn't seem to be very appealing. On the other hand, if stocks are going to waver a bit here and there and interest rates aren't going to be very much higher near term, appreciation in gold and silver may not look so bad. A return of anywhere from 5-25% over the next six months could come to fruition, especially since the metals have been beaten down pretty hard recently. Investors surely have options available to them in various asset classes.
Discounting every negative thing, equity managers don't appear to be fazed by Friday's pounding. They have very short memories, a credit to their brood.
At the Close, Monday, June 8, 2026:
Dow: 50,786.01, -80.79 (-0.16%)
NASDAQ: 25,929.66, +220.26 (+0.86%)
S&P 500: 7,405.73, +21.99 (+0.30%)
NYSE Composite: 23,224.20, -32.30 (-0.14%)
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