Nasdaq 100 Futures Pull Back Ahead of Nvidia Earnings

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

1. Nasdaq 100 E-mini futures (/NQ): -0.44%
2. Five-year T-Note futures (/ZF): +0.07%
3. Gold futures (/GC): +1.03%
4. Natural gas futures (/NG): -0.54%
5. British pound futures (/6B): +0.31%

Holiday trading conditions continue to develop, with trading volume lower in the major futures products yesterday and thus far today. Key events remain on the board, however, keeping traders' interest honed in for the time being: two-year FRN and 10-year TIPS auctions at 1p.m. EST/12 p.m. CST; the November Federal Open Market Committee (FOMC) meeting minutes at 2 p.m. EST/1 p.m. CST; and Nvidia (NVDA) earnings at 4:20 p.m. EST/3:20 p.m. CST.

U.S. equity traders continued to press their bets this morning ahead of key earnings announcements, including Nvidia, which will likely be a decisive report for the Nasdaq 100. The technology-heavy index futures (/NQZ3) rose sharply yesterday but traders have thus far contained their enthusiasm this morning. Note that that the exchange-traded fund (ETF) QQQ, closed at fresh yearly highs, while the continuous futures contract set fresh yearly highs as well.

Treasury rates are falling across the short- and middle-end of the curve as traders bet the Federal Reserve can achieve its soft landing. Five-year T-note futures, which are sensitive to interest rate risks, moved higher this morning ahead of the FOMC minutes due later today. Meanwhile, rate traders continue to put more chips on an interest rate cut for March. Moreover, traders were encouraged by a strong set of bond auctions earlier this week that added more pressure to yields.

Gold futures (/GCZ3) are benefiting from the risk-on tone that is prevailing across other assets, with traders also bidding silver prices (/SIZ3) higher as well. A weaker dollar and softer Treasury yields are making precious metals an attractive bet, with investors perhaps seeing it as a way to diversify from long stock positions as economic headwinds mount. Today’s FOMC minutes will likely dictate market sentiment ahead of the holiday trading pause for equity and bond markets.

Natural gas prices (/NGZ3) fell to seven-week lows this morning as the commodity eyes its fourth daily loss. So far, the U.S has seen a relatively mild November, which has contained inventory draws over the past few weeks. According to the Energy Information Administration (EIA), total underground gas storage sat at 3,776 billion cubic feet (Bcf) for October 31. That is the second highest level over the past five years for October. Combined with record production, the bears remain in command.

British pound futures (/6BZ3) continue to benefit from hawkish comments made earlier this week by Andrew Bailey, Bank of England Governor. Bailey told parliament’s Treasury Select Committee that it was still too early to consider rate cuts, citing upside risks to price growth. That was a concession to more hawkish members of the board, some of whom voted to hike rates at the last meeting when the bank held at 5.25% for the second time. Now the market is focusing on finance minister Jeremy Hunt’s expected changes to fiscal policy and the Autumn Statement.

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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