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16 Sep 2022

S&P 500 Futures trace Wall Street’s losses but yields retreat as traders await US data, Fed

  • Market sentiment remains sluggish despite a pullback in the bond coupons.
  • Recession woes, hawkish Fed bets join China-linked headlines to weigh on sentiment.
  • S&P 500 Futures stay pressured at weekly low, US 10-year Treasury yields ease.
  • Preliminary readings of Michigan CSI for September will decorate calendar, next week’s FOMC is the key.

The risk profile remains unclear during Friday’s Asian session as the stock futures and equity benchmarks resist respecting a pullback in the US Treasury bond yields.

That said, S&P 500 Futures drop 0.65% intraday by the press time, poking the one-week low around 3,990 while the US 10-year Treasury yields dropped 1.7 basis points to 3.442% after rising 1.38% the previous day.

The latest pullback in the US bond coupons could best be considered as a consolidation in the market sentiment ahead of the preliminary readings of the Michigan Consumer Sentiment Index (CSI), expected 60 versus 58.2 prior. However, the risk appetite remains weak as firmer US data bolster the hawkish Fed bets amid recession fears.

US Retail Sales rose 0.3% in August versus 0.0% expected and July’s revised down -0.4%. Further, NY Fed Empire State Manufacturing Index improved to -1.5 in September compared to -31.3 in August and market expectation of -13. Alternatively, Philadelphia Fed Manufacturing Index declined to -9.9 for the said month compared to 2.8 expected and 6.2 prior. Additionally, US Industrial Production slid to -0.2% in August versus a market expectation for an expansion of 0.1% and downwardly revised prior to 0.5%.

Following the US data, the market priced in the Fed’s 0.75% and 1.0% rate hikes during the next week’s Federal Open Market Committee (FOMC), with 77% and 23% chances as per the CME’s FedWatch Tool.

Also, Reuters came out with the news stating that US President Joe Biden to hit China with broader curbs on US chip and tool exports. Previously, Bloomberg ran a piece suggesting that China is likely to witness harder days than it witnessed in 2020. On the same line was the news surrounding the Sino-American tussles and the People’s Bank of China’s (PBOC) inaction. Elsewhere, fears that the Eurozone will remain in dire conditions despite having a good stock for winter joined hawkish comments from the European Central Bank (ECB) policymakers to keep the oil traders as pessimists.

Overall, the risk-off mood is likely to prevail and can favor the US dollar, despite the recent pullback in the US Dollar Index (DXY) from the one-week-old resistance line. That said, the US Michigan CSI may offer intraday directions but major attention will be on the next week’s Fed meeting.

Also read: Forex Today: The greenback keeps on keeping on

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Gold price (XAU/USD) is displaying a balanced profile in a narrow range of $1.661.51-1,666.76 after surrendering the critical support of $1,670.00 in
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NZD/USD Price Analysis: Bulls step in and eye the 0.6000s

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