Where we are: The S&P 500 futures contract is currently trading at 7164.50, down 0.58% on the day, trading within a range of 7147.75 to 7223.00. This is a notable pullback from the cash close at 7173.90, and suggests some pressure heading into the New York open. We’re watching for a test of the lower end of that overnight range.
What’s driving it: The primary driver is unease around the AI trade. A Wall Street Journal report highlighting missed targets at OpenAI has triggered selling pressure in software and hardware names, pulling down the S&P 500 futures. Rising Treasury yields, with the 2-year at 3.848% and the 10-year at 4.364%, are not helping risk sentiment. Counteracting this, however, is strength in energy stocks fueled by rising oil prices; WTI crude is above $91.00/bbl after the latest Iran-related headlines.
- CB Consumer Confidence at 10:00 ET will be closely watched, especially after last month’s dip. A further decline below the forecast of 89.0 will reinforce the narrative of a slowing consumer and pressure the S&P 500.
- The rally in the 10-year breakeven inflation rate to 2.44%, while positive on the surface, is likely contributing to concerns about persistent inflation and the potential for continued hawkishness from the Fed.
- Despite the mildly short positioning in S&P 500 futures (-109,957 contracts), the 69th percentile net positioning suggests there is still room for shorts to increase exposure if the AI-driven selloff intensifies.
NY session focus: The session will be dictated by the reaction to Consumer Confidence at 10:00 ET. Support lies at the overnight low of 7147.75. A break below that and we could test 7100. Upside resistance sits near the overnight high of 7223.00. The trade that’s working is shorting the AI names within the broader tech sector, but be mindful of energy strength potentially offering some offset. The at-risk trade is long-duration bonds; stick to the short side. The pain trade for the S&P 500 is a strong Consumer Confidence print reversing the morning selloff, triggering a violent short squeeze into tomorrow’s tech earnings.