Where we are: S&P 500 futures are trading flat around 5,300, holding onto gains from the recent rally. The overnight range has been relatively tight, contained within 5,290 and 5,310. This level is slightly above yesterday’s NY close, suggesting a modest positive bias heading into the open. Key levels to watch remain the all-time high near 5,330 and support around 5,275.
What’s driving it: The US picture remains focused on the interplay between growth and inflation. While earnings have largely supported the market, rising real yields, currently at 1.96%, present a headwind for risk assets like the S&P 500, as they increase the opportunity cost of holding equities versus safer fixed income. Geopolitical jitters, specifically the ongoing conflict involving Iran, add another layer of complexity; however, markets appear to be largely pricing in the near-term disruption to oil shipments, with WTI crude trading just below $100/bbl.
- The 2s10s yield curve is at 0.52%, suggesting that markets are not overly concerned about a recession despite the rise in yields.
- Speculator positioning in S&P 500 futures is modestly short, with net non-commercial contracts at -109,957, but this is only at the 69th percentile, so squeeze risk is moderate rather than acute.
- Apple’s strong earnings report, highlighted by a 3% premarket jump, is supporting tech sentiment and the broader market.
NY session focus: The key event for today’s session is the ISM Manufacturing PMI and Prices data at 10:00 ET. A stronger-than-expected print on the prices component (forecast at 80.0) could reignite inflation concerns and trigger a further rise in yields, potentially weighing on the S&P 500. Conversely, a weaker reading could provide some relief and allow the rally to continue. Focus will also be on how the market digests the analyst calls on Nvidia, Apple, and other large-cap stocks. The trade that’s working remains long tech, particularly Apple, while the trade at risk is short energy, given the ongoing geopolitical risks. The pain trade would be a significant upside surprise in the ISM prices component, forcing a rapid repricing of Fed rate expectations.