S&P 500 Starts Quietly as Yields Inch Back Up

Also, two-year T-note, copper, crude oil and euro futures

1. S&P 500 E-mini futures (/ES): +0.17%
2. Two-year T-note futures (/ZT): +0.10%
3. Copper futures (/HG): +0.98%
4. Crude oil futures (/CL): +1.09%
5. Euro futures (/6E): 0.00%

Last week was one to remember, with the best five-day move in U.S. equities and second-best weekly performance by U.S. Treasuries thus far in 2023. But with so many of the moves coming on the back of significant macroeconomic releases and a steep decline in volatility, a distinct lack of catalysts in the coming days may mean that this week offers relatively calmer price action across all asset classes.

After the best week of the year—stocks rose all five days last week—U.S. equity futures are pointing to a modest open today. Last week’s leader, the Russell 2000 (/RTYZ3), is barely high, perhaps weighed down by the swing higher in U.S. Treasury yields. A light macro calendar over the coming days puts focus back onto earnings: Gilead Sciences (GILD) and Uber (UBER) tomorrow and Disney (DIS) on Wednesday are main releases of interest.

The sharp drop off in U.S. Treasury yields last week was predicated on several catalysts, from the Treasury quarterly refunding announcement (QRA) schedule announcement to the October U.S. jobs report on Friday. (The QR outlines the duration and quantity of bonds the government will auction through the quarter.) But macro catalysts are lacking in the coming days, while a wave of new issuances are set to hit markets. Coupled with two separate sets of remarks from Federal Reserve Chair Jerome Powell, the jubilance in bonds may cool off in the coming days.

Copper prices (/HGZ3) rose this morning, up about 1%, as the metal continued its climb from lows not seen since 2022. Traders are betting losses are in for the year and rate cuts next year will lead to a rebound in the economy, as well as continued demand growth from the electric vehicle segment. Speculators, otherwise known as non-commercial traders, trimmed the net short position on the metal, according to Friday’s commitments of traders report (COT).

Saudi Arabia and Russia said Sunday they would continue as planned with previously announced output cuts, which are scheduled to go through the year. The major exporters said they would soon review their plans to decide whether to extend, cut or increase the cuts. Oil prices (/CLZ3) moved higher this morning as the market digested the news.

Euro futures (/6EZ3) traded higher after purchasing managers’ index (PMI) data for the services sector crossed the wires overnight, which slashed more pessimistic views. But the sector remains in contractionary territory. The recent flush in Treasury yields and the European Central Bank’s (ECB) signal from last week’s meeting is helping to clear some upside for the European currency. Fed Chair Powell is set to speak this week and will likely influence the foreign exchange markets with his comments.

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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