Nasdaq 100 Holds Near Highs as Bonds Break Again

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

1. Nasdaq 100 E-mini futures (/NQ): -0.11%
2. 30-year T-bond futures (/ZB): -0.65%
3. Gold futures (/GC): -0.75%
4. Crude oil futures (/CL): +1.34%
5. Japanese yen futures (/6J): -0.86%

Lackluster earnings results and a thin macroeconomic calendar today have U.S. equity indexes trading sideways to lower at the start of the U.S. cash equity session. But the big move is coming in bonds, where weakness at the long end of the curve is having a knock-on effect through metals and FX. The weekly U.S. jobless claims report came in right on the nose, suggesting the labor market remains resilient.

Nasdaq 100 E-mini futures (/NQH4) pulled back from all-time highs Thursday morning as traders awaited the next round of data that could influence the Federal Reserve. Tomorrow’s update to the consumer price index is in focus, with the annual revisions expected to recalibrate rate cut bets if they deviate substantially from initial data. This morning’s initial jobless claims figure came in under forecasts, underpinning the narrative that the Fed has some room to start cutting rates.

A 30-year Treasury bond auction is in focus for bond traders today, but the results will also influence broader market sentiment, especially concerning U.S. equity markets. The Treasury is set to auction $25 billion worth of the bonds, which will close a week of several high-impact auctions. Yesterday, a 10-year auction was met with slightly better-than-expected demand, pressuring the note’s yield. 30-year T-bond futures (/ZBH4) fell about 0.7% ahead of the Wall Street open.

A strong dollar and rising Treasury yields punished gold prices this morning, with /GCJ4) falling 0.64% and extending its weekly loss to nearly 1%. Still, the metal has remained above the crucial 2,000 mark since early December as U.S. yields remained below the highs traded in October. Meanwhile, silver futures (/SIH4) are treading water, remaining above January lows. Tomorrow’s consumer price index (CPI) revisions and next week’s inflation report will likely provide the roadmap for gold’s direction over the next week.

Energy markets are continuing to show signs of rebalancing following last week’s aggressive sell-off, with crude oil prices (/CLH4) working on a fourth consecutive daily gain. Although the latest weekly report from the U.S. Energy Information Administration (EIA) showed crude stocks were building faster than anticipated, traders seem more focused on the longer-term outlook provided by the EIA earlier this week: U.S. oil production would not increase in 2024, diminishing a potential supply-side issue for oil.

The Japanese yen is faltering against a strong dollar, with futures (/6JH4) breaking into fresh yearly lows as it sinks nearly 1%. Traders will now watch the November low at 0.00672 as a level of support. The Yen has disappointed bulls this year who expected the chance for a pivot in Bank of Japan policy to support the currency. Japan’s commercial banks have increased cash in accounts that draw negative interest in a sign that the country’s bankers are betting on such a policy shift. That is one of the things the central bank encouraged banks not to do with the policy of negative interest.

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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