Markets Give Back Gains as Growth in Employment Slows, the US Dollar Gains and Inflation Pressure Returns

Also 30-year T-bond, copper, crude oil, and Japanese yen futures

1. S&P 500 E-mini futures (/ES): -0.33%
2. 30-year T-bond futures (/ZB): +0.03%
3. Copper futures (/HG): -0.92%
4. Crude oil futures (/CL): -1.64%
5. Japanese yen futures (/6J): -0.37%

Gains in US equity markets were short-circuited today following the release of the July US Institute for Supply Management (ISM) services purchasing managers’ index (PMI). Topline growth is slowing, employment is fading quickly, and inflation pressures are at their highest level since October 2022 — if the report is to be believed. So much for rate cuts for good reasons when the Federal Reserve meets in September. Treasuries are twisting, precious metals are rising and the US dollar is clawing back recent losses at the halfway mark of the trading day.

The S&P 500 futures ticked higher this morning to extend yesterday’s rally as investors focus on positive corporate earnings. Palantir (PLTR) rose nearly 9% in early trading after the company posted positive earnings results. Caterpillar (CAT) warned investors of a tariff charge of $1.5 billion, but the stock rose about 1.15% in early trading. Pfizer (PFE) rose over 4% after the drug maker raised its full-year guidance. Yum Brands (YUM), the parent company of KFC, Pizza Hut and Taco Bell, slipped nearly 3% after missing revenue estimates. Advanced Micro Devices (AMD) will report earnings after the bell today.

Treasuries moved lower as the rally over the past few days following Friday’s jobs report cools. Investors are confident that the Fed will cut rates next month, with the CME Group’s Fed Watch Tool showing a 90% chance for a 25-basis-point rate cut. San Francisco Fed President Mary Daly recently said the time for rate cuts is soon, citing a labor market that is showing weakness and little evidence that tariffs have pushed prices higher. 30-year T-bond futures (/ZBU5) fell 0.24% in early trading.

Copper prices moved lower this morning as weakness from last week’s White House exemption announcement works its way through the market. The remaining tariffs affect only copper pipes and conductors for electronic equipment, which accounted for about a quarter of US imports. American copper producers like Freeport McMoran (FCX) were slightly lower this morning as well. Meanwhile, the arbitrage that existed before the exemption announcement has vanished from the market, which could cause products to flow back to Asia.

Crude oil prices (/CLU5) dropped to a one-week low this morning as concern over the global economy weighed on sentiment for the commodity. OPEC+ recently announced it will increase production by 547,000 barrels per day in September. Meanwhile, traders remain unconvinced President Trump will take decisive action against Russia’s crude oil complex because risking higher fuel prices could hurt his domestic agenda. Trump did threaten India with higher tariffs over its purchases of Russian crude. Traders are watching today’s inventory report from the American Petroleum Institute (API).

Japanese yen futures (/6JU5) remained lower after US services PMI data crossed the wires. That came in at 50.1, just above the expansion/contraction point and below estimates. The weaker-than-expected print may keep gains in the greenback capped for now. The Bank of Japan’s June meeting minutes showed it’s open to more rate hikes once trade tensions subside. That said, the wild card remains the US-imposed trade war, which is complicating the view for global central banks.

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Michael Rechenthin,Ph.D., (aka “Dr. Data”), managing director of research and development, has 25 years of trading and markets experience. He’s known best for his weekly Cherry Picks newsletter. On Thursdays, he appears on Trades from the Research Team LIVE.
Nick Battista, tastylivedirector of market intelligence, has a decade of trading experience. He appears Monday-Friday onOptions Trading Concepts Live. On Wednesdays, he co-hosts Johnny Trades. @tradernickybat
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