S&P 500 Hits New High as 10-year Yield Dips Under 4.3%

Also, 10-year T-note, gold, crude oil and Australian dollar futures

1. S&P 500 e-mini futures (/ES): +0.54%
2. 10-year T-note futures (/ZN): +0.33%
3. Gold futures (/GC): +0.05%
4. Crude oil futures (/CL): +1.09%
5. Australian dollar futures (/6A): -0.52%

The Federal Reserve rate cut odds continue to build for March 2024, increasing to 43% as implied by fed funds futures.

This is good news for both bonds and stocks, which are moving to fresh November highs and multi-month highs in many cases. The third-quarter U.S. GDP report was revised higher to +5.2% annualized, underscoring the fact that the seemingly impossible ‘soft landing’ has been happening over the past few months. The OPEC+ meeting tomorrow and Federal Reserve Chair Jerome Powell’s speech on Friday remain the most notable events on the calendar for the rest of the week.

Equity markets surge

U.S. equity markets are pushing towards fresh monthly highs amid the continued drop in U.S. Treasury yields, following the increase in expectations for a rate cut by the Federal Reserve in early 2024. The better-than-expected U.S. GDP report is help fuel the domestic-focused Russell 2000 (/RTYZ3), which is the top performer out of the gate this morning. Overall, U.S. equity indexes are trying to carve out their fifth straight week of gains.

The upward revision to the third-quarter U.S. GDP report has undercut some of the gains seen by bonds, but U.S. Treasury yields remain lower across the curve. The long end is back in the driver’s seat, with 30s (/ZBZ3) and ultras (/UBZ3) posting the largest gains on Wednesday. Meanwhile, the U.S. Treasury 10-year yield fell below 4.300% for the first time Sept. 15.

Metals and crude oil surge

The continued decline in U.S. Treasury yields is proving a boon for metals in recent sessions, though it should be noted that both gold and silver are gaining across all currencies, not just in U.S.-dollar terms. Gold prices (/GCG4) hit their highest level of the month and their strongest level overall since May 17 in today’s session, while silver prices (/SIG4) moved up to their highest level since May 11.

OPEC+ will meet tomorrow, but crude oil prices (/CLF4) have been rallying over the past 24-hours in anticipation of an extension of production cuts, led by Saudi Arabia. The prospect of limited supply is not alone in supporting prices, with a report from the American Petroleum Institute (API) highlighting a draw in crude inventories for the first time in five weeks, pointing to better demand. The weekly inventory report from the Energy Information Administration (EIA) is due at 10:30 a.m. ET/9:30 a.m. CDT today.

Australian dollar and Japanese yen

A softer than anticipated inflation report from Australia cut down on Reserve Bank of Australia rate hike odds, kneecapping the Australian dollar (/6AZ3) in overnight trade. Meanwhile, the continued rebound in energy prices is weighing on the Japanese yen (/6JZ3), which has proved sensitive to changes in crude oil prices (/CLF4) since the start of 2022. The broader DXY Index is working on its first daily gain since last Wednesday.

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

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.