Nasdaq 100 Slips as Yields Climb, Gold Shines

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

1. Nasdaq 100 E-mini futures (/NQ): -0.29% 
2. 10-year T-note futures (/ZN): -0.64% 
3. Gold futures (/GC): +0.68% 
4. Crude oil futures (/CL): +0.02% 
5. Euro futures (/6E): +0.58% 
   

Appetite for risk is in retreat today as the contours of the “Sell America” trade take shape once more: Stocks, bonds and the US dollar are down; gold prices are up. Is this a knock-on effect of the US fully losing its AAA status? A thin economic calendar has ceded the spotlight to earnings reports from retailers, which have by and large offered diminished outlooks thanks to tariffs. Fiscal policy is likewise in focus as House Republicans continue to iron out details in Trump’s One Big Beautiful Bill; the prospect of increasing deficits and debts raises the possibility of increased Treasury supply at the long-end moving forward. 

US equity index futures are lower across the board, led lower by the Russell 2000 (/RTYM5). “Higher for longer” interest rate speculation has been a meaningful obstacle for the small cap index since the start of 2022, and the latest surge in yields at the long-end has once again proved problematic. Notably, the Nasdaq 100 (/NQM5) is holding up better than its counterparts thanks to Alphabet (GOOG/GOOGL) outperforming following the Google I/O developer conference. 

Here’s a simple way of understanding what’s happening in the bond market: Supply and demand. Assuming demand holds constant, there will need to be an increase in supply of U.S. Treasuries, particularly at the long-end of the curve, to finance the Trump administration’s tax and spending plans. As supply rises, prices fall. For bonds, prices are inversely related to yield, so lower bond prices induced by more supply means higher yields. That’s the whole story for 10s (/ZNM5) and 30s (/ZBM5) this week, which have crossed 4.5% and 5%, respectively. 

“Sell America” is cooking today, which means metals are on boil. Gold prices (/GCM5) are leading the way higher mid-week, having posted a gain that’s approaching 4% since last week’s close. While the US debt downgrade has rolled off the market’s back, one can’t dismiss the fact that the metals have held on to and extended their gains in recent sessions. Underscoring the rally has been the fact that volatility is rising for both gold and silver (/SIN5), a contemporaneous indicator during uptrends over the past 18+ months. 

For all the attention on Washington, perhaps traders should be paying more attention to Jerusalem and Tehran. Reports emerged late yesterday that Israel was preparing to strike Iran’s nuclear facilities, a step that did not have the backing of the Trump administration. Crude oil prices (/CLN5) rose as much as 3.48% today, but with cooler rhetoric prevailing in the United States, oil has retraced nearly all of its daily gains. 

The US dollar is down across the board today, but perhaps the more concerning development (from a technical perspective) is the loss of 100 in the Dollar Index ($DXY). The corresponding level in the euro (/6EM5) is roughly 1.1300, which was the neckline of a double top (or head and shoulders pattern, depending upon your interpretation) in April. The technical interpretation of the price action is necessarily that the US dollar has not bottomed out yet. 

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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