S&P 500 Hits New August High with Jackson Hole at End of Week

Also, 10-year T-note, silver, crude oil and Japanese yen futures

1. S&P 500 E-mini futures (/ES): +0.03% 

2. 10-year T-note futures (/ZN): -0.38% 

3. Silver futures (/SI): +0.40% 

4. Crude oil futures (/CL): +0.28% 

5. Japanese yen futures (/6J): -0.99% 

The volatility that plagued the first few trading days of August is a mere footnote of history at this point. The VIX is back below 16, and each of the S&P 500 (/ESU4) and Nasdaq 100 (/NQU4) are at or near fresh August highs. The V-shaped rebound in equities may be an obstacle for bonds because traders have been allocating incremental capital to stocks. Iranian saber-rattling continued overnight, although energy markets are beginning to treat the situation like ‘the boy who cried wolf’ as promised retaliation hasn’t arrived (yet). Attention will turn to Jackson Hole, Wyoming, later this week for the Federal Reserve’s annual policy symposium. 

The S&P 500 inched higher today, trimming losses from earlier in the day before the open following one of the best weeks for the index since 2023. Advanced Micro Devices (AMD) rose 2% in morning trading after a deal to acquire server maker ZT Systems excited investors. The all stock and cash deal will expand AMD’s portfolio to bolster its position against Nvidia (NVDA).  

The relaxation of volatility across markets has led to a pullback in expectations for aggressive Federal Reserve interest rate cuts through the end of the year—and, in turn, bonds have pulled back to consolidate over the past two weeks. Whereas six 25-basis-point (bps) rate cuts were discounted through the end of the year as of Aug. 5, there are now just four. Subsiding growth fears likewise are incentivizing investors to allocate to stocks over bonds. A 20-year bond auction is scheduled for Wednesday.

Silver prices (/SIU4) paced higher today to extend the bullish performance from last week, when the metal gained 4.57%—its best week on a percentage basis since early July. The divergence from gold, which is down 0.26%, is pushing the gold-silver ratio lower from multi-month highs earlier this month. The ratio, still above 80, leaves plenty of room for more price divergence between the two assets. A weaker dollar is helping to fuel the speculative appetite in silver. 

Natural gas prices (/NGU4) surged nearly 5% this morning. On Friday, Baker Hughes data showed that gas rigs fell from the prior week, supporting the view that producers are cutting some production with prices below 2.2 mmBtu (million British thermal units), an unprofitable level for most U.S. producers. Last week, a U.S. appeals court thew out several Biden administration provisions regarding safety measures for natural gas pipelines. 

The short positioning in the Japanese yen is nearly a thing of the past for now, according to Friday’s data from the Commodity Futures Trading Commission. Large speculators flipped net long for the week ending Aug. 13. The shift comes after a currency intervention that sent the yen higher and unraveled the carry trade in the currency, which helped to fuel an unwind in speculative assets. For now, the yen is on a better footing for more gains.  

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

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro. 

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.