Where we are: Dow futures are currently trading at 49328, up 545 points or 1.12% on the day, having printed a high of 49405. This compares to yesterday’s cash close of 48862 and positions the index firmly in positive territory ahead of the cash open. The overnight range has been 48608-49405, reflecting a bullish move in the Asian and European sessions.
What’s driving it: The primary driver is a continued bullish sentiment following hyperscaler earnings and strength in European equities, with the DAX up 1.92%. While the Federal Reserve reaffirmed its commitment to its current policy stance yesterday, the market’s attention is squarely focused on today’s key US data releases. Strength in energy prices, with WTI Crude near $100, is also playing a role, but any negative impact on consumer spending is yet to materialise.
- The 10-year breakeven inflation rate sits at 2.46%, up 2bp, indicating inflation expectations are creeping higher.
- Speculator positioning in Dow futures remains modestly short, with net non-commercial holdings at -1,731 contracts, suggesting room for a short squeeze.
- European cash equity markets are broadly higher, with the DAX +1.92%, CAC 40 +1.49%, and FTSE 100 +1.27%, fostering a positive risk-on environment.
NY session focus: All eyes are on the 08:30 ET release of Advance GDP, Core PCE, and Employment Cost Index data. A stronger-than-expected GDP print (forecast 2.2%) could fuel further gains, while a miss could trigger a sharp reversal. Key levels to watch are 49400 on the upside and 49000 as initial support. The current trade is long Dow futures, but a weaker-than-expected GDP print poses a significant risk. The pain trade would be a significant rally in the Dow driven by a surprisingly strong GDP number that simultaneously sees the 10-year yield break above 4.40%.