As Monday’s rally fades, traders wonder whether the trade cease-fire was already priced in

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Trump met Xi Saturday after the G-20 leaders’ gathering and returned to the U.S. with a promise to hold off on new tariffs while negotiations continue for 90 days. The White House declared victory, but some strategists said it’s too soon to judge whether there will be a successful conclusion.

“The gulf between the two sides remains large, with the U.S. delegation seeking fundamental changes in the Chinese economic model that we find it hard to believe will be acceptable to China. In this connection, the scope and ambition of the talks remains to be defined,” wrote Cowen policy strategist Chris Krueger.

Beyond Trump’s trade policy and the Fed, there are other issues impacting the market.

“I still think some of the basic issues are still in place…Friday we get another wage number that’s going to bring that back in focus again,” said James Paulsen, chief investment strategist at Leuthold Group. A hotter wage number could signal to markets that there’s potentially higher inflation ahead, and therefore a more hawkish Federal Reserve.

“It’s certainly a Santa rally. We have had one.. it qualifies as one with [stocks] 8 percent off the lows. Whether it carries all the way, I don’t know. I just think I’d be defensive on this. If you didn’t sell your tech stocks, now is a good time,” Paulsen said.

Paulsen said he believes the market will see lower lows, and if not this year, then in the first half of next year. “I don’t really think we had a washout panic yet,” he said.

Boockvar said despite the market’s positive reaction to Powell last week, the Fed remains a concern. “On the Tuesday before Powell spoke, the 2-year was at 2.83 percent. Today, they were at 2.81. They really haven’t moved that much,” he said. The 2-year reflects the Fed’s policy moves more closely than longer duration Treasurys.

As Monday’s stock market rally faded, buyers went into bonds, pushing yields lower. The 10-year yield, as high as 3.04 percent was below 3 percent at midday.

“We had a very low inflation number within the ISM series. The optimism that people were expecting to have some durability, given the trade truce, was unable to really carry through.” said Ian Lyngen, head of U.S. rates at BMO.

Lyngen said bonds were also reacting to the fizzling stock rally. “It is the acknowledgement of the reality that a trade deal with China may be too little, too late to offset concerns about a slowing in the economy,” said Lyngen.