Where we are: S&P 500 futures are trading at 7402.00, up 0.30% and pushing against the intraday high of 7410.00. This comes after a solid rally in cash yesterday, which saw the S&P close at 7365.10, gaining nearly 1%. The overnight range has been relatively tight, suggesting consolidation before the US open. We’re poised to test new record highs, building on the momentum from the previous sessions.
What’s driving it: The prevailing narrative is one of continued risk appetite underpinned by a dovish read on the Fed, even without any fresh catalysts today. The pullback in US Treasury yields, particularly the 2-year falling 4bp to 3.834%, is easing concerns about imminent rate hikes and supporting equity valuations. While the 10-year real yield (TIPS) is ticking higher, its impact is currently being offset by a broader risk-on sentiment. A weaker dollar, with the DXY down 0.22% to 97.69, is adding fuel to the fire.
- Net non-commercial positioning in S&P 500 futures is modestly short at -100,522 contracts, which, at the 75th percentile, suggests some squeeze potential if the rally extends.
- The 10Y breakeven inflation rate is down 5bp d/d, signalling that the market may be starting to price a disinflationary trend.
- WTI crude oil remains elevated, trading above $109, but the broader market appears to be shrugging off inflationary concerns, focusing instead on growth prospects.
NY session focus: All eyes will be on the 08:30 ET Unemployment Claims data release. A higher-than-forecast print (above 205K) could inject some volatility and potentially trigger a risk-off move. Key levels to watch are 7410.00 on the upside and 7377.25 as initial support. The trade that’s working is long S&P 500 on dips, while short positions are at risk if the market breaks decisively above the 7410 level. The pain trade would be a sharp reversal driven by a surprise hawkish shift in Fed rhetoric or a significant deterioration in the geopolitical landscape.