S&P 500 Resumes Rally as Treasuries Turn Higher

Also, 10-year T-note, gold, crude oil and euro futures

1. S&P 500 e-mini futures (/ES): +0.37%
2. 10-year T-note futures (/ZB): +0.22%
3. Gold futures (/GC): -0.98%
4. Crude oil futures (/CL): +1.36%
5. Euro futures (/6E): +0.12%

A weak 30-year bond auction and seemingly hawkish commentary from Fed Chair Jerome Powell on Thursday tipped markets lower into the end of the session, but thus far on Friday, traders are shaking off any of yesterday’s concerns.

Both stocks and bons are trading higher around the opening bell in New York, while precious metals remain pressured and energy markets are rebounding after a devastating week.

S&P 500 traders pick up pieces

The S&P 500’s (/ESZ3) and Nasdaq 100’s (/NQZ3) best winning streaks in years ended yesterday, but traders are picking up the pieces ahead of the weekend.

The deleveraging seen throughout October on Fridays, due to concerns around the Israel-Hamas war, seems to be a pattern relegated to history at this point as well. The Russell 2000 (/RTYZ3) is working on its first green day this week.

Cyberattack in China has bond markets on edge

10-year T-note futures (/ZNZ3) pushed higher this morning as markets moved back into a risk-on stance going into the weekend.

However, bond traders are on edge after a cyberattack hit Industrial & Commercial Bank of China’s U.S. trading desk overnight. The attack crippled the bank’s ability to clear Treasury transactions, although the bank said that all trades had been settled as of this morning.

Still, the extent of the damage and the fear of more attacks from the unknown ransomware group have Treasury markets on edge. Still, bond yields are moving lower across the curve and that should bode well for equities today.

Yesterday’s gains in gold prices (/GCZ3) are already gone as prices moved sharply lower through the morning, pushing into fresh three-week lows.

The move comes despite a moderating dollar and falling Treasury yields. It looks like traders are deploying their cash into equity markets as the market affirms its view that the Federal Reserve is done hiking interest rates. Raphael Bostic, president of the Federal Reserve Bank of Atlanta is due to speak later today, but other than that, there is little in the way of economic data that would influence precious metal prices.

Energy market confusion

There is a lot of confusion in energy markets recently and traders continue to search for answers.

The other day, Saudi Energy Minister Prince Abdulaziz bin Salman pushed back against the narrative of weakening demand, saying “people are pretending it is weak.”

That is up for debate, as gasoline demand in the United States has decreased for four straight days, according to GasBuddy’s Patrick De Haan. Speculators have also grown increasingly short over the past several weeks, however, floating storage—according to Kpler data—has been falling. That typically does not happen in a loose market. For now, traders will have to follow the price action.

Bullish sentiment grows for euros

Euro futures (/6EZ3) are inching higher but the currency remains on track to record a loss for the week going into the weekend.

Still, bullish sentiment has grown recently, which explains last week’s rally, bolstered on the view that the Federal Reserve is done hiking interest rates. Next week might provide the answer on if we continue higher or not, with traders focused on updated Euro Area Q2 GDP numbers and October inflation data out of the United States.

Treasury premiums against their comparative European counterparts have moved lower over the past several weeks, although they remain near multi-year highs.

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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