S&P 500 Rebounds Ahead of Long Holiday Weekend

Also, two-year T-note, gold, natural gas, and British pound futures

1. S&P 500 E-mini futures (/ES): +0.36%

2. Two-year T-note futures (/ZT): -0.03%

3. Gold futures (/GC): +0.14%

4. Natural gas futures (/NG): -2.61%

5. British pound futures (/6B): +0.33%

Traders pushed U.S. equity markets higher on today, but the U.S. benchmark S&P 500 remains on track to record a small loss for the week, which would break a four-week win streak. Treasury yields moved slightly higher after better-than-expected economic data. There is little left in the way of event risks from economic events, likely leaving the prevailing bullishness intact, although light liquidity ahead of the long holiday weekend leaves the potential for volatility and quick moves. U.S. markets, including the bond market, are closed Monday for Memorial Day

S&P 500 contracts (/ESM4) rose this morning, potentially breaking a three-day losing streak. Still, U.S. equities are on track to record a weekly loss, and today’s volume will likely be on the lighter side, with many traders already off the desk for the holiday weekend. That said, we shouldn’t take too much away from price action today.

Treasuries are down across the curve this morning after a better-than-expected result from the Commerce Department’s U.S. durable goods orders data for April, which showed a 0.7% increase from the month prior. The CME’s FedWatch Tool shows the first rate cut is expected in September, with Fed Funds futures showing a 55% chance for a cut at that meeting. Next week, traders will focus on the April personal consumption expenditures (PCE) index.

Gold prices are slightly higher this morning but remain on track to record a loss for the week. Prices are trading near the 2,340 level, the lowest since May 9. However, gold may be due to resume its upward path next week if inflation data shows a clearer path for Federal Reserve interest rate cuts. The oversized positioning among speculators in gold contracts shows the recent pullback was likely because of some profit taking instead of a fundamental shift in gold’s case.

Natural gas contracts (/NGN4) slipped nearly 3% this morning, extending losses from Thursday as traders take profits following a multi-week rally in the commodity. Short traders trimmed positions last week amid higher prices, so today’s data from the Commodity Futures Trading Commission (CFTC) will be in focus to assess how funds are reacting amid another rise in prices earlier this week (the CFTC data cuts off on Tuesday).

Yesterday, the Energy Information Administration (EIA) showed that supply grew 0.4% from the prior week while demand fell 0.6% over the same period, according to data from S&P Global Commodity Insights. Net injections totaled 78 billion cubic feet (bcf) for the week ending May 17, which left working gas in storage 606 bcf above the five-year average.

The British Pound recovered from yesterday’s losses that stemmed from a below-estimated consumer spending print as above-trend inflation keeps bulls engaged in the long side of the trade. An upcoming general election will likely keep Sterling volatility elevated until July because of the uncertainty around the new government. The chances for a June interest rate cut have nearly vanished for the Bank of England, which should provide a tailwind for the currency in the meantime.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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