S&P 500 Finds New All-Time Highs as PPI Deflation Emerges

Also 10-year T-Note, Silver, Crude Oil, and Australian Dollar Futures

1. S&P 500 E-mini futures (/ES): +0.61%
2. 10-year T-Note futures (/ZN): +0.1%
3. Silver futures (/SI): +1.01%
4. Crude Oil futures (/CL): +1.18%
5. Australian Dollar futures (/6A): +0.76%

U.S. traders are embracing the strong AI guidance from Oracle (ORCL) overnight in pushing U.S. equity markets to fresh highs, and the first set of meaningful data this week isn’t hurting sentiment either. The August producer price index (PPI) showed deflation month-over-month, coming in at -0.1%. Fed rate cut odds have lifted for next week, with the chances of a 50-bps cut up from 7% yesterday to 10% today. The drift lower in U.S. Treasury yields is helping prop up metals at the expense of the U.S. Dollar.

S&P 500 futures (/ESU5) carved out a fresh record high this morning after rising 0.61% in early trading. A big move higher in Oracle (ORCL) from a positive earnings report helped to push prices higher. Traders also found relief after this morning’s PPI report reinforced Fed rate cut bets. Futures indexes are set to roll to the next contract on Monday, with that roll pressure being excreted onto the market today, which should accelerate through the week. This Friday is also the third of the month, which means that we will see a triple witching event. Those factors could increase volatility, but as of now, the inflation report is helping to keep volatility contained. Chewy (CHWY) fell 16% despite meeting estimates for its latest reporting period.

10-year T-Note futures (/ZNZ5) rose 0.1% this morning. The PPI reported sent prices from small losses to small gains after it removed the chance that traders would dial back rate cut bets. The consumer prices report tomorrow still poses a risk to the outlook, which would likely impact bond prices if effected. Today, traders are watching a 10-year note auction scheduled for this afternoon, with a specific focus on how foreign demand will hold up for U.S. debt. We’ll also get a 30-year bond auction tomorrow.

Silver prices (/SIZ5) managed to move higher this morning, rising about 1.01% following the inflation report. The metal hit a fresh 14-year high yesterday, and bulls appear confident in holding onto those gains as it outpaces gold prices. A softer dollar and lower yields helped sentiment, but risks lie ahead with tomorrow’s CPI report and next week’s Federal Reserve interest rate decision. Currently, prices are trading within a bull flag pattern, suggesting that an upside extension of the prior leg higher is possible.

Crude oil prices (/CLV5) rose over 1% Wednesday morning as geopolitical tensions continued to rise, bolstering concerns over potential supply disruptions. Poland shot down Russian drones, marking the first time a NATO nation has directly interdicted Russian military assets in the Ukrainian war. The development comes after Israel conducted a military operation using air assets to strike Hamas leaders in Qatar, a U.S. non-NATO ally. Meanwhile, the White House is pressuring Europe to tariff China and India over its purchases of Russian crude oil. The Energy Information Administration (EIA) will release its weekly inventory data later today.

A risk-on tone across equity markets helped push Australian Dollar futures (/6AU5) higher Wednesday morning. Higher commodity prices and the expectation that the Federal Reserve will cut interest rates next week is also helping to lift the Aussie. Meanwhile, rate cut forecasters for the Reserve Bank of Australia (RBA) don’t see a rate cut until at least November. Today's move saw /6AU5 briefly push to a fresh yearly high.

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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