S&P 500 Eyes Second Consecutive Loss for First Time in Six Weeks

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

1. S&P 500 E-mini futures (/ES): -0.46% 
2. 30-year T-bond futures (/ZB): +0.13% 
3. Gold futures (/GC): +0.56% 
4. Crude oil futures (/CL): +0.74% 
5. Japanese yen futures (/6J): +0.04% 

The continued shift higher in global bond yields has made for difficult sledding for stocks this morning. While U.S. Treasuries have reversed losses overnight and during the early U.S. hours, the S&P 500 remains lower and is eying its second consecutive daily close lower for the first time since early-September. Simmering tensions between Israel and Iran are giving oil prices a reason to hold onto some geopolitical risk premium. Elsewhere, even as the U.S. dollar extends to fresh monthly highs, precious metals are continuing their incredible run, with both gold and silver setting fresh yearly highs.

Traders on Wall Street sold equities for a second day, as the S&P 500 (/ESZ4) dropped by nearly 0.5% ahead of the opening bell. All eyes are on Tesla (TSLA) earnings due out after the bell. Investors want to know if the electric vehicle maker’s margins continued to improve in the third quarter. 3M (MMM) rose nearly 5% after beating estimates on earnings this morning. General Motors (GM) was up about 3% after it beat earnings and raised its sales guidance. 

Bond futures were higher this morning, especially along the long-end of the curve. Traders sought safety overnight as Asian equity markets fell. Bonds sold off sharply to start the week as traders reassessed the outlook on Federal Reserve interest rate cuts. Economic data later this week could push bonds lower if they continue to show the U.S. economy remains strong. Patrick Harker, president of the Philadelphia Fed, is expected to speak later today. 

Gold prices (/GCZ4) benefited from a risk-off tone across Asia-Pacific markets overnight. The metal has accelerated into new all-time highs even as the dollar continues to rise. Meanwhile, traders remain slightly confused on the Fed’s path forward, with debate about how many rate cuts there will be and when they will come injecting some volatility into Treasuries. The uncertainty is likely to help bolster gold’s appeal. For now, it looks like more strength is ahead of us. 

The rebound from last week’s sell-off in crude oil prices (/CLZ4) continued for a second day today, with prices rising about 1% this morning. China’s stimulus measures earlier this week are supporting the crude complex. Earlier this week, Saudi Aramco’s head said he was bullish on oil demand in China. Earlier this week, the Asian economic engine did report increased refinery activity for September. Traders have their eyes on data due out today from the American Petroleum Institute (API).  

Despite more widening in rate differentials this morning between the United States and Japan, Japanese yen futures (/6JZ4) are slightly higher. Still, the yen looks poised to continue moving lower, which brings into question the possibility of another intervention by Japanese authorities. Last week, Japan’s vice finance minister for international affairs, Atsushi Mimura, said the currency is being closely monitored.  

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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