Where we are: S&P 500 futures are currently trading lower, around 5285, trimming yesterday’s rebound. The index is struggling to break above resistance at 5300, and remains below last week’s highs. Overnight range has been relatively tight, but we are seeing some pressure as Treasury yields climb.
What’s driving it: Rising US Treasury yields are weighing on the S&P 500, as the 2-year and 10-year yields have both climbed 6 basis points to 4.13% and 4.67% respectively. This is amplified by a slight decrease in 10-year breakeven inflation to 2.44%, pushing real yields higher to 2.18% and creating a headwind for risk assets, gold in particular. Furthermore, Walmart’s cautionary outlook on sales growth, citing potential fuel cost pressures, adds to the market’s concerns about corporate earnings.
- The US 10Y Real Yield rose 5bp to 2.18%, diminishing the appeal of risk assets.
- Walmart’s warning of a profit miss due to slowing sales growth contrasts with Target’s performance, raising sector-specific concerns.
- Net non-commercial positioning remains modestly short at -138,905 contracts, suggesting limited fuel for a significant rally.
NY session focus: Today’s economic calendar includes the Philly Fed Manufacturing Index and Unemployment Claims at 08:30 ET, followed by Flash Manufacturing and Services PMIs at 09:45 ET. A weaker-than-expected print from the Philly Fed could provide a temporary reprieve, while stronger data would likely exacerbate the yield-driven selloff. Keep an eye on the 5250 level as initial support, with a break below potentially opening the door to further downside. The pain trade here is a surprise dovish tilt from Barr speaking at EMERGE, unwinding the yield curve steepening.