Where we are: S&P 500 futures are trading at 7261.75, up 32.25 points (+0.45%) and testing the overnight high of 7269.00. Cash closed yesterday at 7200.80, well below Friday’s record, but futures are attempting to build on the overnight recovery. The overnight range has been contained above 7224.00, suggesting some bottom-picking ahead of today’s key data.
What’s driving it: The S&P 500 is finding support from a pullback in energy prices and a generally positive tone in earnings despite some disappointments. Falling real yields are also acting as a tailwind. Attention now turns to a raft of US data at 10:00 ET, including ISM Services PMI, JOLTS Job Openings, and New Home Sales, which will set the tone for the remainder of the session. A strong read on these numbers could reinforce bets of a hawkish Fed, while a miss would likely fuel further upside.
- The 10Y real yield has fallen 3bp to 1.91% d/d, providing some respite for risk assets after the surge in yields last week.
- Net non-commercial positioning in S&P 500 futures is modestly short at -100,522 contracts, which is the 75th percentile over the last 52 weeks, suggesting less room for further short covering, but also limits scope for a large long liquidation.
- UBS strategists believe large caps are set to outperform small caps which may attract investors to large caps in SPX.
NY session focus: The key focus today is the 10:00 ET data dump. The ISM Services PMI (forecast 53.7) will be particularly important in gauging the strength of the US economy. Watch for a break above the overnight high of 7269.00, which could trigger a move towards new record highs. Failure to break higher could see a retest of support around 7224.00. The trade that’s working is dip-buying in mega-cap tech. The trade at risk is shorting the S&P ahead of earnings season conclusion. The pain trade is a strong data print igniting a fresh surge in yields and a sharp S&P sell-off.