Where we are: S&P 500 futures are currently trading at 7169.25, down 4 points, or -0.06%, within a daily range of 7161.25 to 7188.25. The cash S&P 500 closed yesterday at 7138.80, putting the futures contract slightly below that level pre-open. The index faces resistance around the 7188 intraday high and support near 7161.
What’s driving it: The market is primarily focused on today’s Federal Reserve announcements, with rates expected to remain unchanged at 3.75%. Rising US yields are putting some pressure on equities, with the 10-year yield at 4.371%, up 1.6bp on the day. This rise in yields is also reflected in the 2-year yield, which is up 3.3bp to 3.879%. Despite the lack of an expected rate change, the FOMC statement and subsequent press conference at 14:30 ET will be crucial for assessing the Fed’s outlook on inflation and future policy direction.
- The 10-year real yield is rising to 1.91% indicating that hawkish inflation expectations are putting pressure on gold.
- Speculator positioning in S&P 500 futures is modestly short, at -109,957 contracts, suggesting a potential for a short squeeze if the Fed strikes a dovish tone.
- WTI crude oil continues its ascent, trading above $91 a barrel which could stoke inflation concerns.
NY session focus: All eyes are on the Fed today, with the Federal Funds Rate announcement and FOMC Statement at 14:00 ET, followed by the FOMC Press Conference at 14:30 ET. Traders will be scrutinizing Powell’s language for any hints about future rate cuts or concerns about inflation. Watch for reactions around 7200 (resistance) and 7130 (support). The trade that’s working is fading the rallies and shorting on a hawkish Fed tone. The trade at risk is buying into this pre-Fed dip. The pain trade is a dovish Fed coupled with strong tech earnings after the close, triggering a significant risk-on rally.