Where we are: S&P 500 futures are currently trading at 7536.25, down 18.50 points or -0.24% on the day, sitting near the bottom of their overnight range of 7506.25-7557.50. This is below yesterday’s cash close of 7520.40 but still within yesterday’s cash range of 7499.70-7530.70. The index appears to be consolidating after the recent run-up, lacking a clear catalyst for further upside.
What’s driving it: The market is in a holding pattern ahead of the 08:30 ET data dump, with traders likely hesitant to commit to a strong direction. The Fed’s Cook and Jefferson speeches offered little new information, leaving the focus squarely on the incoming economic data. A steeper-than-forecast GDP print may push the index lower, whilst a hotter Core PCE m/m might signal a larger than anticipated rate hike. Despite a modestly short speculative positioning in S&P 500 futures, any unexpectedly hawkish data is likely to accelerate the sell-off, triggering a short squeeze on the other side of the trade.
- The US 10Y yield is at 4.479%, down 2.2bp on the day, indicating some flight to safety.
- The 10Y Breakeven Inflation rate ticked down to 2.39% yesterday, reflecting waning inflation expectations.
- Commodity prices remain elevated, with WTI crude at $112.25, potentially adding to inflationary pressures despite the slightly declining break-evens.
NY session focus: All eyes will be on the 08:30 ET data release, specifically the Core PCE Price Index, Prelim GDP, and Unemployment Claims. A combination of strong growth and sticky inflation could spook the market, potentially pushing the S&P 500 down towards the 7500 level. Conversely, weaker-than-expected data could provide a boost, targeting the overnight high of 7557.50. The trade at risk is a complacent long position expecting continued easy gains; the working trade is a nimble two-way book. The pain trade would be a Goldilocks scenario – strong growth alongside moderating inflation – triggering a sharp rally.