Where we are: The Dow Jones futures are currently trading at 50659, down 151 points or 0.30% on the day, after a relatively tight overnight range of 50576-50819. This is slightly below yesterday’s cash close of 50644, which itself gained 157 points on the day. The futures market is currently holding above the 50500 level, but showing signs of vulnerability pre-market.
What’s driving it: The market’s cautious tone ahead of the 08:30 ET US data dump is the primary driver. Specifically, the core PCE and prelim GDP figures are front and center, as the market tries to gauge the Fed’s likely path. We’ve seen a notable easing in yields across the curve, with the 10Y at 4.479% and the 2Y at 4.049%, as the market continues to digest recent Fed commentary and lower expectations for aggressive rate hikes. Lower real yields are giving gold a tailwind, and equity markets are also benefitting.
- The US 10Y yield is down 2.2bp on the day at 4.479%, extending its recent decline, reflecting easing inflation concerns.
- Net non-commercial Dow positioning is moderately short at -10,765 contracts, but increased 7,203 w/w.
- Jefferson spoke overnight, but his remarks regarding the US economy and global developments were not market moving.
NY session focus: All eyes are on the 08:30 ET data trifecta: Core PCE, Prelim GDP, and Unemployment Claims. A beat on GDP combined with sticky PCE could reignite inflation fears and send yields higher, weighing on the Dow. Conversely, a soft GDP print alongside a benign PCE could fuel dovish expectations and provide a boost. Key levels to watch are 50500 as initial support and 50800 as resistance. The trade at risk is shorting the Dow, particularly if the data comes in dovish. The pain trade would be a hot GDP and PCE print, triggering a significant sell-off and forcing shorts to cover.