S&P 500, Nasdaq 100 Futures Dip as Long-End Yields Rise, Dollar Drops

Also 30-year T-Bond, Gold, Natural Gas, and Japanese Yen Futures

1. S&P 500 E-mini futures (/ES): -0.18%
2. 30-year T-Bond futures (/ZB): -0.16%
3. Gold futures (/GC): -0.07%
4. Natural Gas futures (/NG): +3.63%
5. Japanese Yen futures (/6J): +0.62%

U.S. equity markets are looking to close the weeks near all-time highs, led by continued strength in the Nasdaq 100 and S&P 500. Both are a bit softer on Friday as attention has swung to the healthcare sector, where Warren Buffet’s 5 million share purchase of downtrodden UnitedHealth (UNH) is helping provide a lift for stocks that are less growth-oriented, more value-oriented. Elsewhere, attention is on Anchorage, Alaska, where U.S. President Donald Trump and Russian President Vladimir Putin are meeting to discuss an end to the Russian invasion of Ukraine.

S&P 500 futures (/ESU5) gave up earlier gains that came after U.S. retail sales data this morning that showed strong consumption for the month of July. Intel (INTC) rose over 4% on a report that the U.S. government is considering taking a stake in the company. That didn’t help the broader semiconductor space, however, with the VanEck Semiconductor ETF (SMH) falling more than 2% in early trading. UnitedHealth rose 10% after news that Warren Buffett’s Berkshire Hathaway took a stake in the company. Applied Materials (AMAT) fell 13% following a disappointing earnings report.

Treasury yields moved higher at the long-end of the curve, with yesterday’s PPI report continuing to weigh on inflation expectations. 30-year T-Bond futures (/ZBU5) fell 0.16% in early trading. Meanwhile, interest rate cut bets remained steady. The CME’s FedWatch tool showed a 92.6% chance for a 25-basis point rate cut at the Fed’s September meeting. While the retail sales data was encouraging, investors are pricing in uncertainty premium into long term yields.

Gold prices (/GCZ5) were largely unchanged Friday morning, with prices down about 0.07% through the first hour of U.S. trading. Gold is trading into the lower end of its July range, and prices are pushing below the 21-day exponential moving average (EMA) after falling below the moving average at the start of the week. President Trump and President Putin are slated to meet later this afternoon, with many expecting it to lay the groundwork for a ceasefire in Ukraine. The tone right now is a risk-off one when it comes to geopolitical risks, which is likely working against gold.

Natural gas prices (/NGU5) rose Friday morning by more than 3%, but prices are on track to record a weekly loss. The Energy Information Administration (EIA) said yesterday that natural gas stocks rose 56 billion cubic feet for the week ending August 8. Gas consumption rose compared with the previous week, according to S&P Global Commodity Insights data. However, supply continued to rise and imports from Canada accelerated. That, along with a mild weather forecast for the United States through the rest of the month, has put pressure on the commodity. Prices are now back at the falling 9-day EMA and below the 3 handle, which leaves bears in control going into the weekend.

Japanese Yen futures (/6JU5) rose for a third day on Friday as broader dollar weakness supported the Japanese currency. The Bank of Japan (BoJ) can hike rates as soon as October, which should help the Yen via a stronger yield premium versus the United States since the Fed is expected to start cutting in September. Concerns about political stability in Japan are also fading, helping to take some pressure off of the currency.

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

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.