Natural Gas Soars

Also, S&P 500, 2-year T-note, silver and euro futures

1. S&P 500 e-mini futures (/ES): +0.04%
2. Two-year T-note futures (/ZT): -0.02%
3. Silver futures (/SI): -1.79%
4. Natural gas futures (/NG): +7.47%
5. Euro futures (/6E): +0.21%

In the coming days, the earnings calendar is lighter with nothing on the scale of Nvidia (NVDA) earnings scheduled. And the economic docket is rather dry, outside of the release of the Federal Reserve’s preferred gauge of inflation later this week.

That leaves market participants in a holding pattern at the start of the new week. U.S. equity futures are mixed, with none of the big four showcasing gains or losses greater than +/-0.16%.

Bonds continue to twist, with the short-end weaker as the long-end strengthens. The biggest mover on the board is natural gas (/NGJ4), which has seen another sharp move higher on the back of growing speculation that the supply glut may be easing.

S&P 500 and Nasdaq 100 inch up

Both S&P 500 (/ESH4) and Nasdaq 100 (/NQH4) futures tracked modestly higher ahead of Monday’s opening bell after stocks were propelled last week by a concentration of big tech names known as the magnificent seven.

This week’s performance will depend on what several economic data points show, including the Fed’s preferred inflation gauge and the second estimate for second quarter U.S. gross domestic product (GDP) data.

If inflation shows further signs of cooling and GDP shows a strong economic backdrop, investors may continue to push prices higher.

Treasury performance is mixed

Treasuries were mixed across the curve on Monday morning as traders prepared for an event-heavy week that could sway market bets on when the Federal Reserve will deliver an interest rate cut.

Yields hit their highest mark of 2024 last week as the calculus for a rate cut shifted to June. The rate-sensitive 2-year T-Note futures (/ZTH4) was up 0.03%.

Today we will see several important Treasury auctions, including 13- and 26-week bill auctions and auctions for the two-year and five-year notes.

Silver falls

Metals came under pressure overnight as European bond yields rose. Silver futures (/SIH4) fell nearly 2% but prices are trading in the middle of a range set from January lows and February highs.

A stronger dollar and higher Treasury yields have held bulls back as rate cut bets were recalculated but this week’s inflation data could give the green light if Thursday’s print points to further moderation in prices.

Natural gas soars

Natural gas futures (/NGH4) rose nearly 7.5% this morning despite a clear fundamental catalyst for the energy commodity.

With prices near 30-year lows, the potential for further downside is waning, which is likely incentivizing shorts to take profits against any up moves in the price. Meanwhile, inventories in the U.S. and Europe are at healthy levels, and with the end of the winter withdrawal season quickly ending, any moves to the upside may be hard to sustain over the short term.

Euro futures rise

Euro futures (/6EH4) moved higher to start the week, extending last week’s trend higher as markets settled with the reality that the first Federal Reserve cut won’t come until June.

European Central Bank President Christine Lagarde is due to speak today from Strasbourg, France, in an event debating the ECB’s 2022 annual report. Still, the upside for the Euro may run into resistance soon with bets for the ECB slowly shifting to prefer a cut before the Fed.

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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