June 30 – Stocks are poised to add to last week’s record gains as we close out the month and the fiscal quarter, based on overnight activity. Trade talks with Canada are “on” again, while there is also a bit more optimism about talks with China, and the Senate is moving forward with its “vote-a-rama” on the tax bill that will likely include many proposed last-minute amendments. The VIX is trading near 17 this morning, while the dollar index trades near 97.3. Yields on 10-year Treasuries are trading near 4.26%, while yields on 2-year Treasuries are trading near 3.73%. Crude oil prices are quietly trading mixed to weaker this morning, while the grain and oilseed sector is also quietly mixed ahead of today’s two big USDA reports known for their surprises.
The U.S. Senate is designed to move slowly. Its rules tend to make passage of bills tedious and laborious. There’s a purpose for that – it is designed to reduce the risk of our elected officials passing bad legislation by getting caught up in an emotional response to a problem. The House advanced President Trump’s “One Big Beautiful Bill” to the Senate earlier this summer. Senate Republicans now think that they have enough votes to move the bill through by the narrowest of margins, or they wouldn’t have started the voting process. We won’t know until the final vote is cast, and Vice-President Vance will be present to break any tie votes for the president if needed, but we should have the final vote later today. The tax bill will then go back to the House, where it can accept it, or reject it for the changes that the Senate has made. The two can also send the bill to a Conference Committee to work out their differences, and then they can give an up or down vote to what comes out of that committee. The President still hopes to have the bill on his desk to sign by Independence Day on Friday, but that may prove to be a challenge. They have another month before the debt ceiling part of the bill becomes more critical to see action.
President Trump halted all trade talks with Canada last week when it was set to move forward with its digital services tax on U.S. technology companies to go into effect today. Canada dropped the digital services tax last night, allowing trade talks to start again just 10 days prior to the scheduled U.S. taxes to go back into effect on Canada and many other nations. The Biden Administration had complained to Canada about the proposed tax last year, but it was still moving forward toward implementation. Canada is the second biggest trading partner with the United States behind Mexico, purchasing nearly $350 billion of U.S. goods in 2024, while sending nearly $413 billion in goods south to the United States. Newly elected Canadian Prime Minister Mark Carney met with President Trump at the G-7 Conference earlier this month, agreeing to reach a comprehensive trade agreement within 30 days. That seemed at risk on Friday, but it’s a possibility once again this morning after Canada dropped the technology tax.
Wall Street was encouraged by another trade deal last week with China – at least that’s how it was reported on Friday. China denies that it was a new deal, but rather that it was that both sides worked out more of the details of a framework deal reached a few weeks earlier. Neither side is saying much about the deal, although it seems to have focused on the flow of rare earth minerals and magnets out of China to the United States. Both sides agreed to remove trading restrictions for various products, but no specifics have been released. It’s largely believed that the United States will ease restrictions on Chinese purchases of key semiconductors that China needs in exchange for China allowing rare earth minerals to flow to the United States.
The trade war continues to take a toll on China’s economy, although there are heavily subsidized sectors that are doing better. China’s manufacturing PMI for June came in at 49.7, up from 49.5 in May and up from 49.0 in April. But a number below “50” still designates month-on-month contraction. The new orders sub-index firmed slight above “50” to 50.2 in June, up from 49.8 in May, responding to the 90-day roll-back in tariffs agreement reached in May. The non-manufacturing PMI rose to 50.5, up from 50.3 the previous month, reflecting modest growth in the service sector. Meanwhile, the property sector continues to slump, keeping consumer confidence near record lows.
The next 7 days are very pivotal for the grain and oilseed markets. We get USDA’s quarterly grain stocks and planted acreage reports at Noon Eastern Time today. These reports are known for their market-moving surprises. Friday is the Independence Day holiday, and the associated holiday weekend is often pivotal for trading weather for the corn market, sending prices one way or the other based on what the 15-day outlook shows on Sunday night for corn pollination. The White House says that it may announce up to 10 major trade agreements over the next week to 10 days – any of which could have significant implications for agriculture. What will the final version of the tax bill contain regarding 45Z funding for biofuels? Finally, July is when China typically ramps up purchase of U.S. soybeans for fall delivery. Will that occur this year, or will sales remain near zero?
