S&P 500: Stocks Open the Week With a Rebound and More Earnings Ahead

Also, the Two-Year T-Note, Gold, Crude Oil, and Australian Dollar Futures

1. S&P 500 e-mini futures (/ES): +0.50%
2. Two-year T-note futures (/ZT): -0.03%
3. Gold futures (/GC): -0.58%
4. Crude oil futures (/CL): 0.00%
5. Australian dollar futures (/6E): +0.46%

Deleveraging ahead of the weekend was met by the relatively good news that a temporary ceasefire was declared in the Israeli-Hamas war to open humanitarian corridors out of Gaza and into Egypt.

The darlings at the end of last week, crude oil and gold, have retreated as the calendar has turned into the second half of the month. Meanwhile, absent a meaningful macro docket in the coming days, traders’ attention will be on the bevy of earnings releases around the corner: Bank of America (BAC) and Goldman Sachs (GS) on Tuesday; and Tesla (TSLA) and Netflix (NFLX) on Wednesday.

All four major U.S. equity index futures are back in the green on Monday after a discouraging performance to close out the week. Last week’s big loser, the Russell 2000 (/RTYZ3) is leading higher, with the S&P 500 (/ESZ3) right on its heels. Earnings will be in focus in the coming sessions. Investors also will watch and speeches from Federal Reserve officials, as the Fed laid groundwork for no additional rate hikes over the past week.

Bonds are down across the curve at the start of the week as there appears to be an unwinding of a safe haven trade that played out on Friday, amid expectations that the Israeli-Hamas war could escalate over the weekend. Instead, the safety positions are being jettisoned in favor of a return to stocks. It’s noteworthy that the biggest movers continue to be 30-year bonds (/ZBZ3) and ultras (/UBZ3) instead of the two-year notes (/ZTZ3), as markets become increasingly comfortable with the idea that the Federal Open Market Committee (FOMC) is done raising rates.

Last week’s rush into precious metals isn’t carrying over into Monday trading, with gold prices (/GCZ3) down $10 to trade at $1,930. Bond yields are moving higher as investors seek safety amid ongoing conflict in the Middle East. Meanwhile, industrial metals are benefiting from a move by China’s central bank to inject liquidity into its economy. Copper prices (/HGZ3) are up slightly and on track to break a four-day losing streak.

Crude oil is starting the week higher as expectations mount that the United States will tighten its enforcement actions against Iranian oil exports, which could remove hundreds of thousands of barrels per day from global supply. Meanwhile, the U.S. is taking efforts to contain the Israel-Hamas conflict from broadening across the region. Energy markets are likely in for a volatile week.

A move by China’s central bank—the People’s bank of China (PBOC)—overnight is propping up the Australian dollar, with prices (/6AZ3) rising about 0.5% this morning despite mixed risk appetite in other assets. The PBOC pushed 289 billion yuan into the market through its medium-term lending facility. That was the largest injection in over three years.

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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