Where we are: Dow futures currently trade at 49891, up 274 points or 0.55% on the session, having traded in a range of 49609 to 49955 overnight. Cash Dow closed yesterday at 49597, having traded a wide intraday range between 49488 and 50130. Futures are holding the overnight bid, suggesting dip-buyers are active and look to push above the psychological 50,000 level. We’re watching to see if this bid sustains into cash open.
What’s driving it: The pre-market bid is being supported by the overnight risk-on tone, fueled by strong earnings prospects and a robust labor market. The rise in 10-year breakeven inflation to 2.45% suggests inflation concerns haven’t completely dissipated, potentially influencing the Fed’s future decisions, but doesn’t appear to be weighing on equities. For now, the market is looking through rising energy prices and focusing on corporate profitability, while betting that a Fed hike is not yet certain.
- Strong S&P target from RBC on supportive economic backdrop.
- 10Y real yields remain elevated at 1.94% offering a tailwind to gold.
- Speculator positioning in the Dow Jones is modestly short, which is around the 56th percentile, reducing squeeze risk.
NY session focus: All eyes will be on the 08:30 ET releases of Average Hourly Earnings, Non-Farm Employment Change, and the Unemployment Rate. A beat on payrolls, with a higher unemployment number could spook the market, while a miss on payrolls will likely support this rally higher. Keep an eye on 10:00 ET Prelim UoM Consumer Sentiment and Inflation Expectations. The trade that’s working is long tech given strong productivity and growing demand, while the trade at risk is short oil should the US-Iran ceasefire hold. The pain trade here is a surprisingly hawkish message from President Trump at 12:00 ET that spooks risk.