Nasdaq 100 Holds Steady as Markets Await Fed Rate Decision

Also, 10-year T-note, gold, crude oil and Japanese yen futures

1. Nasdaq 100 E-mini futures (/NQ): +0.18% 
2. 10-year T-note futures (/ZN): +0.07% 
3. Gold futures (/GC): -0.57% 
4. Crude oil futures (/CL): -0.3% 
5. Japanese yen futures (/6J): -0.55% 

A torrent of promising headlines regarding trade talks between the U.S. and China overnight has done little to stoke broader optimism among traders on today. The modest gains by U.S. equities, however, are underscored by a swing toward “Buy America,” with bonds and the U.S. dollar higher while gold prices have traded lower. Of course, the curbed enthusiasm may be a result of the Federal Reserve rate decision scheduled for later today: With markets not in favor of a rate cut, and likewise no new summary of economic projections due, all attention will be on Federal Reserve Chair Jerome Powell’s press conference. 

The positive news on trade concerning negotiations between the United States and China added to optimism in the market, sending Nasdaq 100 contracts (/NQM5) 0.3% higher in early trading. Disney (DIS) rose nearly 10% after the company beat Wall Street estimates and raised its full-year guidance. Super Micro Computer (SMCI) fell 4% in early trading after delivering weak guidance and missing expectations. Uber (UBER) fell 2% after revenue missed estimates.  

Treasuries fell on the short end of the curve as traders await the Fed’s policy decision and commentary from Fed Chair Powell. Markets expect the central bank to stay on hold as policymakers evaluate how the trade war will affect growth and inflation. 10-year T-note futures (/ZNM5) rose 0.07% in early trading. Meanwhile, Treasury Secretary Scott Bessent said that the upcoming meeting will focus on de-escalation. Tomorrow, bond traders are watching a 30-year auction from the Treasury.  

Gold prices (/GCM5) shifted lower as the dollar strengthened and risk-taking moved back into equity markets, falling 0.57% in early trading. The move comes after two days of solid gains for the metal, which put prices near the all-time high reached in April at 3,509.9. Today’s policy meeting from the Fed may affect gold prices, but the optimism around trade talks may weigh on the metal for now.  

Despite the optimism around trade, crude oil prices (/CLM5) fell 0.51% after trimming overnight gains. A trade deal between the U.S. and China could help subdue an expected slowdown in the economy. For now, traders seem focused on selling the growth-sensitive commodity as OPEC+ prepares to unleash more oil onto the global market. Meanwhile, U.S. producers continue to signal spending will be pulled back, suggesting U.S. oil output has topped. The Energy Information Administration (EIA) reported a 2.03 million barrel drop in crude oil stocks last week, exceeding the expected 1.7 million barrel decline.  

If there were another place (aside from precious metals) to look at the market’s faith in the news flow regarding the U.S.-China trade war, it would be the FX market. We see the U.S. dollar ($DXY) is up across the board, with the APAC regional safe haven, the Japanese yen (/6JM5), seeing the greatest losses. To this end, traders may find news flow around trade talks more meaningful over the next few days than the Fed rate decision. 

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
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