Reinking: 'Tech is Key,' Mind Commodity Weakness & Market Rotation

**SPEAKER_1** (0:00)
As the market continues to digest the recent flood of headlines, we've been watching some consolidation in stocks. And is there, though, a shift moving under the surface, a more meaningful shift? For more, we want to welcome in Michael Reinking, Senior Market Strategist and Head of MACDESTS here at the New York Stock Exchange. Michael, it is good to see you this morning.

**Michael Reinking** (0:19)
Good morning. Happy summer Monday morning.

**SPEAKER_1** (0:22)
It feels like a sleepy summer week right now, but it also feels like wait-and-see mode, right?

**Michael Reinking** (0:27)
Yes, for sure.

**SPEAKER_1** (0:28)
So we've got tech a little soft this morning. We've got several things in front of us happening this week. We've got the Treasury Secretary set to speak later today. We've got Jackson Hole coming up. And then in the middle of the week, we get a bookmark, a big bookmark with NVIDIA.
Let's start out with what do you think matters the most this week?

**Michael Reinking** (0:48)
Yeah. Look, I mean, there's clearly a lot of moving pieces. The buyback announcement from last week is still kind of rippling its way through financial markets, right? We've seen kind of the debasement trade come back, precious metals and crypto continuing to rally this morning.
You have quite a few tech headlines out over the weekend, right? The price increases, some of the negative headlines around the frontier models and pricing and uptake, right? So you're seeing that pressure, kind of the tech trade, right? And then you have kind of the big question mark with Kevin Warsh on Friday. I still think, you know, at this point, tech is kind of the key to this market. It's just such a big factor within US markets that that's going to largely be the driver. And then what that leads us to is whether or not the rotation, right, that we've seen over the last couple of months, if that will continue to potentially offset any weakness that we're seeing kind of within tech, particularly this morning.

**SPEAKER_1** (1:49)
And so when you think about that rotation, that equal weight, what are you paying attention to in terms of the patterns there?

**Michael Reinking** (1:57)
Yeah, so I mean, like, you know, last week, you know, we saw a little bit of weakness, you know, kind of within that tech trade again, you know, it was picked up, you know, healthcare was the clear standout, you know, kind of last week. You know, financials were a little bit weaker, so I think that's something to kind of pay attention to, to see if that finance, you know, the banking side of the financial sector can kind of find its footing this morning, right? And then, you know, you're, you're, you continue to see, you know, the commodity driven trades, the hard asset trades, right, have been, you know, kind of performing. Those are pretty small weightings within the S&P 500, you know, but that gives them some, some room to continue to move.

**SPEAKER_1** (2:34)
Let me ask you really quickly about oil. It's another wild card right now. We're pulling back today on both WTI and Brent, but it doesn't seem to matter right now.

**Michael Reinking** (2:44)
Why do you think? I mean, markets have kind of been looking, you know, kind of past this or, you know, unconcerned at the moment. I think if we were to start to really see oil prices move above 100 into kind of the 100, 110, 120, then markets would definitely start to care because that's going to also feed into kind of the treasury markets, you know, and inflation expectations. Right now, there is this expectation that we've seen kind of the peak of kinetic activity, right, and things are going to slow down. You know, oil is making its way out of, you know, the Strait of Hormuz, you know, which is something that kind of Treasury Secretary Besson also hinted at last week, but a lot of the issue is not just, you know, product, it is the refining capacity or lack thereof that we're seeing where it's not, you know, helping to, you're not being able to take that product and kind of get it to the gas stations and to the pump.

**SPEAKER_1** (3:37)
So you talked about the upside where it matters. If we're sitting at 85 for WTI, where does it matter in terms of fuel, excuse, that was not an intended pun there, Michael.
But in terms of being constructive for equities, is it below $80 a barrel?

**Michael Reinking** (3:56)
Look, I think it's been reasonably constructive up until this point. We saw, we've seen, if we start to see us retest the kind of those recent lows that we'd had in the low 80s, I think markets would react very positively to that. We'll have to see what comes from this afternoon. We've heard about the economic D-Day.