S&P 500 Futures pare weekly gains as yields dribble around multi-year high

  • Global markets remain sluggish amid light calendar, early week optimism defends buyers.
  • S&P 500 Futures drop for the third consecutive day.
  • US 10-year Treasury yields seesaw around 14-year high.
  • Inflation woes keep markets on thin ice, last round of Fedspeak before blackout appears important to watch.

Traders cheer the Friday mood as an absence of major data/events joins mixed catalysts to keep them off the table during the last day of the week. Even so, cautious optimism prevails as the US dollar struggles to benefit from the strong yields and risk-off mood.

While portraying the mood, the US 10-year Treasury bond yields refreshed a 14-year high the previous day, around 4.22% by the press time. Also, the two-year US Treasury yields rose to the highest levels since 2007 before recently taking rounds to 4.62%.

That said, Wall Street closed in the red following an initially upbeat performance while the S&P 500 Futures extend the previous day’s losses with 0.50% intraday downside at the latest.

“US stocks closed lower on Thursday as data on the labor market and comments from a U.S. Federal Reserve official reinforced expectations the central bank will be aggressive in hiking interest rates outweighed a flurry of solid corporate earnings,” said Reuters.

Looking at the data, US Initial Jobless Claims eased to 214K for the week ended on October 07 versus 230K expected and a revised down 226K prior. Further, Philadelphia Fed Manufacturing Survey Index dropped to -8.7 for October versus the -5 market consensus and -9.9 previous reading. Additionally, US Existing Home Sales rose past 4.7M expected to 4.71M but eased below 4.78M prior.

Also, Federal Reserve Governor Lisa Cook mentioned that ongoing rate increases will be required.

Amid these plays, the CME’s FedWatch Tool suggests a near 98% chance of the Fed’s 75 bps rate hike.

Elsewhere, the political crisis in the UK and Japan’s reluctance to intervene despite the multi-year low of the yen, exert downside pressure on the markets. However, China’s readiness to ease virus-led travel curbs seems to defend the buyers. On the same line could be the hopes that Britain will soon overcome the jittery markets.

Moving on, the UK’s Retail Sales and the last dose of the Fed speakers’ comments before the blackout period preceding November’s Federal Open Market Committee (FOMC) meeting will be crucial for clear market directions.

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