Where we are: S&P 500 futures are trading up 0.28% at 7458.25, clawing back some of yesterday’s losses. The cash index closed down 1.44% yesterday, dragged lower by a sharp sell-off in semiconductor stocks. We’re seeing a tentative stabilisation in tech names this morning, but the broader sentiment remains cautious as we await key US economic data. The futures are currently trading above the prior NY close, suggesting a slightly firmer open.
What’s driving it: The primary driver remains the US yield complex, with the 2Y and 10Y yields both up 5.0bp yesterday, pushing real yields higher. This is creating a headwind for equities, particularly growth-sensitive tech. While the broad USD index is firming, the immediate focus is on the domestic inflation expectations, as seen in the 10Y breakeven falling 2.0bp. The market is still grappling with the Fed’s hawkish tilt, with options traders challenging the aggressive hike narrative, but the underlying yield pressure is undeniable.
- US 10Y Real Yields are up 7.0bp d/d to 2.28%, a clear negative for equity valuations.
- The VIX is elevated at 17.28, reflecting ongoing market nervousness despite the futures’ modest gains.
- Net non-commercial positioning in S&P 500 futures remains heavily short at -193,978 contracts, indicating significant squeeze risk on any positive catalyst.
NY session focus: All eyes are on the 08:30 ET data print for any fresh inflation signals or labour market insights that could sway Fed expectations. We’ll be watching the 7470-7480 area as immediate resistance for the futures, with a break above potentially triggering short-covering. Conversely, a failure to hold the 7440 level could see us retest yesterday’s lows. The trade that’s working is fading rallies in highly speculative tech names, but the crowded short positioning means a sharp upward move on a positive surprise is the pain trade.