Where we are: The S&P 500 futures are currently trading at 7610.00, up 17.25 points, marking a 0.23% gain. The overnight range has been 7585.50-7622.00, with the index currently testing the upper end. Cash S&P sits at 7580.10. This price action extends the rally from Friday, fueled by ongoing strength in the tech sector.
What’s driving it: The primary driver is renewed optimism in the US tech sector, spurred by positive earnings news and advancements in AI adoption. A moderately short positioning in the S&P 500 (-159,316 contracts) may be exacerbating the move higher. DXY strength to 99.06 is failing to cap the move, while the 10Y yield is little changed at 4.452%.
- Nvidia’s announcement of its RTX Spark Superchip is driving significant momentum in software and hyperscaler stocks, with Microsoft and Oracle seeing notable gains.
- A new study highlights Nvidia, Meta, and Schlumberger as leaders in AI adoption among S&P 500 companies, further boosting investor confidence in the sector.
- The 2s10s spread has widened slightly to 0.47%, reflecting a modestly steeper yield curve, but this has so far failed to dent risk appetite.
NY session focus: All eyes will be on the 10:00 ET release of the ISM Manufacturing PMI (forecast 53.3) and ISM Manufacturing Prices (forecast 85.3). A strong print could further solidify the rally, while a miss may trigger a pullback. Key levels to watch are 7622.00 as immediate resistance and 7585.50 as intraday support. The trade that’s working is long tech, but the risk is a broader market correction if macro data disappoints and oil prices continue their climb. FOMC Member Powell speaks at 20:30 ET — expect comments on inflation and the economic outlook, but given that it is an acceptance speech, market impact may be limited. The pain trade is a sharp rotation out of tech and into value stocks.