Nasdaq 100 Steadies After Key Reversal; ECB Cuts Interest Rates as Expected

Also, 30-year T-bond, silver, crude oil and Euro futures

1. Nasdaq 100 E-mini futures (/NQ): -0.07% 

2. 30-year T-bond futures (/ZB): +0.07% 

3. Silver futures (/SI): +1.46% 

4. Crude oil futures (/CL): +1.05% 

5. Euro futures (/6E): +0.05% 

U.S. equity markets are trading sideways today after the sharp intraday rally yesterday. How significant was yesterday’s move? The last time the Nasdaq 100 closed higher by more than 1% after trading lower by 1% was in October 2022, the day after the S&P 500 bottomed for the year—and the current bull market began. Traders have come to terms with the Federal Reserve cutting interest rates by only 25 basis points (bps) next week, which may be curbing bullish momentum in bonds. Elsewhere, energy prices are continuing to bounce back after aggressive losses earlier this week. The euro is trading higher after the European Central Bank (ECB) cut rates by 25bps but refrained from indicating further cuts were guaranteed in October.

Equity futures are nearly flat this morning after traders reversed losses in yesterday’s session to finish most indexes in the green. This morning, Kroger (KR) is up over 1% in pre-market trading after the grocer raised its annual sales forecast. Moderna (MRNA) fell nearly 14% after the company slashed research-and-design (R&D) spending. And Alaska Air Group (ALK) gained over 4% after increasing its outlook on strong travel demand.  

30-year T-Bond futures (/ZBZ4) rose this morning ahead of a bond auction scheduled for this afternoon. Traders are expecting strong results after yesterday’s 10-year auction, which was met with strong demand, surprising expectations. Treasuries saw some movement overnight following the ECB rate decision but moderated into the New York session.  

Silver (/SIZ4) accelerated higher this morning after data on factory prices crossed the wires, clearing the calendar for inflation data for the time being, shifting Fed rate cut bets away from risks. Earlier this week, China reported that it didn’t buy any gold for a fourth month, dampening sentiment for precious metals. However, a softer dollar is helping to carve out a path for gold and silver to move higher. 

Crude oil prices (/CLZ4) continued to rebound from a deep sell-off from last week, rising over 1% despite a worsening demand outlook. Hurricane Francine’s advance into the Louisiana coast has likely affected short-term supply, but a downgrade in intensity ahead of landfall could blunt significant disruption to infrastructure. Volatility in /CLZ4 is starting to dissipate: IVR peaked at 84.55 on Sept. 5; it was last seen at 59.8.

As anticipated, the ECB cut its main rate by 25bps today and likewise refrained from issuing concrete guidance that would set markets towards pricing in another rate cut in October. That’s in-line with expectations, which has led to only a modest bounce in the euro (/6EU4). Elsewhere, strength in energy coupled with sideways yields may be giving traders a reason to sell the Japanese yen (/6JU4) into the end of the week. 

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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