Where we are: S&P 500 futures currently trade at 7408.75, up a mere 3.00 points, clinging to a fractional gain of 0.04%. The overnight range has been tight, between 7391.00 and 7420.25. Cash S&P closed unchanged on Friday at 7398.90, so we’re essentially treading water here pre-market.
What’s driving it: Despite the S&P 500’s recent record-setting run, the underlying narrative remains shaky, with high energy prices and the sustainability of the AI rally weighing on sentiment. US 2-year and 10-year yields both rose by 5bp on Friday, with the 10-year real yield climbing 2bp to 1.96%, creating a headwind for gold and potentially equities. While equities have remained near record highs, fuelled by the recent earnings season, pre-market trading shows some weakness in AI hyperscalers and chip producers, who surged last week.
- US 10-year real yields are up 2bp on Friday, applying pressure to risk assets.
- Net non-commercial positioning in S&P 500 futures remains modestly short at -98,581 contracts, although it has increased by 1,941 contracts week-on-week.
- WTI crude closed up 4.16% on Friday, adding to inflation concerns.
NY session focus: Focus will be on whether the market can maintain its upward momentum in the face of rising yields and energy prices. Keep an eye on the AI names; any further weakness there could trigger a broader sell-off. Watch 7420.25 as intraday resistance. A break above that could see a test of higher levels, while failure to hold 7391.00 would open the door to a deeper correction. The pain trade here is a continued melt-up fueled by AI enthusiasm, leaving the shorts scrambling to cover.