Russell 2000, Bonds Bounce After CPI Revisions

Also, 10-year T-note, silver, natural gas and Canadian dollar futures 

1. Russell 2000 E-mini futures (/RTY): +0.20% 
2. 10-year T-note futures (/ZN): -0.18% 
3. Silver futures (/SI): -0.11% 
4. Natural gas futures (/NG): -2.09% 
5. Canadian dollar futures (/6C): +0.05% 

An annual revision to U.S. inflation data came and went this morning without causing much concern, allowing traders to refocus on the chances for a rate cut from the Federal Reserve.

After accounting for the yearly revisions, inflation was almost unchanged, according to a government report. Core inflation—a measure that strips out volatile food and energy prices—was unchanged at an annualized 3.3% in the last three months of 2023.

Bonds across the short- and middle-ends of the curve fell, while equity index futures rose. Now, traders will focus on next week’s consumer price index for January, which will give the first read on inflation for the year. Analysts expect that figure to drop, and those expectations could help to fuel sentiment and leave stocks higher for the week.  

Russell 2000 moves up

Russell 2000 futures (/RTYH4) rose nearly 0.5% ahead of the opening bell, tracking slightly higher than its larger-cap peers.

This morning’s revisions to the consumer price index for 2023 green lighted this morning’s rally but other event risks lie ahead for traders. If next week’s inflation figures for January come in at or below expectations, that could help fuel the next leg of the rally for stocks.

However, the Russell continues to lag the S&P 500 and Nasdaq on a year-to-date basis.  

Treasuries move sideways

Treasuries are moderating across the curve following earlier losses, with 10-year T-note futures (/ZNH4) nearly unchanged ahead of the Wall Street open.

This week saw a series of high-impact Treasury auctions, with a $25 billion 30-year bond auction seeing strong demand on Thursday. That auction was awarded with a high yield of 4.36% against the when-issued yield of 4.380%, indicating solid demand.  

Silver losses continue

Silver futures (/SIH4) are on track to record a second week of losses as of Friday morning as Treasury yields stabilize.

While this morning’s inflation revisions were mainly good news for precious metals, the recent pushback on rate cut odds for March has dented the metals outlook. However, on a technical basis, prices have managed to swing higher from a series of higher lows set in place from October.  

Natural gas drops

Natural gas futures (/NGH4) are down 2% on Friday as unseasonably warm weather continues to blanket much of the United States.

While some cooler weather is forecasted over the next 14 days, according to models from the National Weather Service, it seems to have failed to inspire any buying. Meanwhile, export pressure on the United States is starting to ease amid softening demand from Europe and Asia. With the winter season still having a couple of months left, we could still see increased demand, but it would likely have to be seen across several global regions to spark a structural shift in prices.  

The loonie flies higher

Canadian dollar futures (/6CH4) rose for a fourth day on Friday and prices are on track to break a five-week losing streak.

Minutes from the Bank of Canada (BoC), released on Thursday, showed that policymakers are comfortable with leaving rates unchanged for the time being as they wait for inflation to subside further. That said, unless U.S. rate cut bets come under further pressure, the Canadian dollar might see a period of strength in the coming weeks, especially if oil prices rise.  

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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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