S&P 500 Grinds Higher as Quiet Sets in Ahead of Presidential Debate and CPI Report

Also, 30-year T-bond, gold, crude oil and euro futures

1. S&P 500 E-mini futures (/ES): +0.32% 

2. 30-year T-bond futures (/ZB): 0% 

3. Gold futures (/GC): +0.39% 

4. Crude oil futures (/CL): -0.57% 

5. Euro futures (/6E): -0.09% 

Global financial markets appear to be downshifting into a holding pattern ahead of key data releases later this week. U.S. equity markets are modestly higher, while bond yields are mixed across the curve. The release of the August U.S. consumer price index (CPI) and producer’s price index (PPI) reports over the next two days will draw attention, but now that the Federal Reserve has shifted its attention to the labor market, these inflation data may not pack the same punch from earlier this year. Similarly, the Presidential Debate this evening may help traders better position for a Republican trifecta or a Democratic presidency with a Republican congress.

S&P 500 futures (/ESU4) continued to move higher this morning, extending yesterday’s advance that followed a big down week for indexes. Oracle (ORCL) surged over 9% in pre-market trading after posting strong quarterly results and announcing a partnership with Amazon (AMZN). The recently listed Rubrik (RBRK) posted disappointing results after the bell yesterday, and the stock was trading nearly 7% lower ahead of the opening bell. Traders are shifting focus to today’s earnings due from GameStop (GME) before tomorrow’s inflation data drops.  

The long-end of the Treasury curve is nearly unchanged this morning, with the 30-year T-bond futures contract (/ZBZ4) between trading flat and slightly down this morning. The Treasury is scheduled to auction off three -year notes today. Tomorrow could be a bigger day for bonds, with the U.S. inflation report due and a 10-year auction reopening. The underlying yield for the 30-year bond is trading near the lowest levels since December, near 4%.  

Gold prices (/GCZ4) drifted higher this morning, maintaining momentum from overnight as U.S. yields moderated. The focus is on tomorrow’s inflation report, which will inform rate traders on the path of the Federal Reserve. Anything except a large surprise to the upside should help to support gold prices, although short-term bounces in the dollar could provide opportunities for downside moves.  

Crude oil prices (/CLV4) are trading nearly flat, although traders did trim some overnight weakness that came amid mixed Asian stock trading. The Organization of the Petroleum Exporting Countries (OPEC) lowered its oil demand growth forecast for this year, dropping it to 2.03 million barrels per day (bpd) from 2.11 million bpd. Meanwhile, Tropical Storm Francine is expected to strengthen into a hurricane soon as it moves across the Gulf. The Coast Guard has ordered some ports closed, although Corpus Christi, Texas, remains open.  

Euro futures (/6EU4) continued to move lower ahead of this week’s rate decision from the European Central Bank (ECB). Traders see the ECB cutting this week, but it could also offer an accelerated outlook for more rate cuts, which would weigh on the currency’s outlook. Tonight’s U.S. presidential debate could foreshadow the political risk around the dollar and how it could potentially affect the euro later this year during election season. At the same time, political risks in Europe continue to keep traders on edge.  

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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