S&P 500 Edges Lower After PPI; Gold, Silver Resume Climb

Also 10-year T-Note, Gold, Natural Gas, and Euro Futures 

1. S&P 500 E-mini futures (/ES): -0.09% 
2. 10-year T-note futures (/ZN): -0.01% 
3. Gold futures (/GC): +0.8% 
4. Natural gas futures (/NG): -0.75% 
5. Euro futures (/6E): +0.09% 

U.S. equity markets may have weathered one of the worst stretches of the year during presidential election cycles with nary a scratch. Bonds, on the other hand, are a different story, as both the September U.S. consumer price index (CPI) and Producer Price Index (PPI) reports came in warmer than anticipated (although not out of line with continued progress toward the Federal Reserve’s medium-term target). The divergence between equities and bonds has continued into the end of the week as the reflation theme comes back into focus. Metals are perking up as well, thanks in part to the weaker U.S. dollar. 

S&P 500 futures (/ESZ4) were little changed ahead of the open on this morning, as traders digested new inflation data. Tesla (TSLA) fell nearly 7% in pre-market trading after its robotaxi event failed to impress investors. Wells Fargo & Co (WFC) rose over 3% in early morning trading. The bank’s earnings grew despite a drop in interest income. JPMorgan Chase (JPM) traded flat despite beating expectations. The S&P 500 is on track to record a fifth weekly win.  

Treasuries remained under pressure along the long-side of the curve going into the weekend. 10-year T-note futures (/ZNZ4) traded 0.03% higher just ahead of the U.S. open. The path of interest rates will remain key for the bond market, but bond traders are being aggressive following the Federal Reserve’s 50-basis-point interest rate cut. The underlying 10-year yield rose as high as 4.10% overnight, the highest level traded since July. 
 

Gold prices made a sharp move higher early today, trimming their weekly loss to just 0.10% despite higher rates and a stronger dollar. This morning’s inflation data and yesterday’s jobless claims data show the Fed could remain on track to keep cutting rates at its next meeting, which would be positive for the metal.  

Hurricane Milton has passed through Florida and millions remain without power, but natural gas futures managed to trim losses and turn positive yesterday. That momentum didn’t carry over into the U.S. session, however, with prices selling off directly ahead of the New York equity open. Prices turned negative to trade about 0.7% lower. The Energy Information Administration (EIA) reported an 82 billion cubic feet build in inventories for last week. That was above estimates. Production has risen over the last week, currently at 102 billion cubic feet per day. 

Euro futures (/6EZ4) are on track to end the week sharply lower. A repricing in U.S. interest rate cut bets fueled dollar strength this week. If that repricing is nearly finished, we may see a rebound in the Euro over the next week, but a big retracement might not be warranted given an elevated rate differential between the U.S. and Europe. Meanwhile, currency traders have their eyes on next month’s U.S. election. Trump’s trade war style policy may hurt the Euro more than a Harris victory.  

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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