Stock Market Update

[BRIEFING.COM] The stock market is holding the line now with its relief trade as the indices are trading near their best levels heading into the final 30 minutes of trading.

The mega-cap stocks, led by Tesla (TSLA 349.36, +27.20, +8.44%), have offered some important sponsorship. The Vanguard Mega Cap Growth Index Fund (MGK 352.60, +4.42, +1.27%) is up 1.3%, leaving it well ahead of the market cap-weighted S&P 500 (+0.8%).

Elsewhere, the 2-yr note settled the session down eight basis points at 3.83%, while the 10-yr note yield settled the day down six basis points at 4.32%. 

U.S. Treasuries had the benefit of both a safe-haven trade today and a trade grounded in some increased hope that the Fed could cut rates at the July FOMC meeting. The former was driven by the U.S. strikes on three Iranian nuclear facilities over the weekend, while the latter was precipitated by Fed Governor Bowman saying she could support a rate cut in July if inflation pressures remain contained.

Those pressures eased today with crude futures dropping 7.0% to $68.63/bbl, as the market saw a relatively weak military response from Iran this afternoon as a basis to conclude that it won't be moving to close the Strait of Hormuz and that it is possible there won't be a further military escalation involving the U.S.

Treasuries finished off their best levels of the day but retained the bulk of their gains. The front of the curve led the way on the rate-cut hope, some of which was also priced into the fed funds futures market. According to the CME FedWatch Tool, the probability of a 25-basis point rate cut at the July FOMC meeting increased to 22.7% from 14.5% on Friday. Today's thinking will place an added premium on Fed Chair Powell's Semiannual Monetary Policy Report before the House Financial Services Committee on Tuesday.