Nasdaq 100 Continues Push Higher as Crude Oil Prices Collapse

Also, 30-year T-bond, copper, crude oil and British pound futures

1. Nasdaq 100 E-mini futures (/NQ): +0.13% 
2. 30-year T-bond futures (/ZB): +0.81% 
3. Copper futures (/HG): -1.28% 
4. Crude oil futures (/CL): -4.54% 
5. British pound futures (/6B): +0.35% 

Another solid slate of earnings coupled with a perceived reduction in geopolitical risk is giving traders a dose of confidence on today. The S&P 500 is pushing fresh all-time highs, while the Nasdaq 100 has emerged as the leader as it seeks to retake its July high. A light economic calendar and thin auction schedule has left bonds at the whim of broader cross-asset flows, and the aggressive collapse in oil prices may be helping to spark the turnaround in Treasuries. Concurrently, the decline in yields may be taking some wind out of the U.S. dollar’s sails, which in turn may be helping to prop up gold and silver. 

Nasdaq 100 futures were slightly higher ahead of the open this morning. The December contract (/NQZ4) was up 0.14% after trimming earlier losses. Bank of America (BAC) rose nearly 3% in pre-market trading after topping estimates and showing higher-than-expected trading revenue. Citigroup (C) rose 2% ahead of the bell, with the company reporting strong investment banking revenue. Johnson & Johnson (JNJ) fell despite topping third-quarter estimates. Traders are awaiting earnings from United Airlines (UAL) and Interactive Brokers (IBKR) after the bell.
   

The 30-year T-bond futures (/ZBZ4) rose this morning as yields fell across the curve. Traders digested an update from the New York Federal Reserves’s Empire State manufacturing index, which showed manufacturing activity in New York fell in October, surprising expectations. Traders are pricing in a 92% chance of a 25-basis-point (bps) rate cut for the Fed’s November meeting, up from an 84% chance on yesterday. This is the first time in five weeks when bond prices along the long-end of the curve are on track to rise for the week. The Treasury will auction off 13- and 26-week bills today. 

Copper prices (/HGZ4) fell over 1% today, extending a decline from yesterday. Overnight, sentiment in China broke down, with stocks falling despite gains across the broader Asia-Pacific region. Continued dollar strength is also working against the industrial metal. The expecations for major fiscal measures in China remain subdued despite some earlier optimism. Traders likely won’t get a solid answer on those measures until later this year, but for now the metal is reflecting the uncertainty. A swing high from August near the 4.3 level may offer a zone of technical support if prices continue to fall. 

Crude oil futures (/CLZ4) plummeted this morning, dropping over 4%. The entire geopolitical risk premium priced in from earlier this month when Israel’s war with Gaza heated up have been nearly wiped out. The Washington Post reported yesterday that Israeli officials told the United States they would strike military targets instead of nuclear or oil-related infrastructure. Inventory data from the American Petroleum Institute (API) is due this morning.   

The British Pound is making some gains against the dollar this morning, with futures (/6BZ4) up about 0.35% in early trading. Rate traders in the United Kingdom adjusted rate cut bets for the Bank of England after some mixed labor market data crossed the wires. Tomorrow’s inflation report is expected to show a drop below 2% on a year-over-year basis for Great Britain.  

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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