S&P 500 Faces Rising Oil, Yields in Historically Difficult Week

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

1. Nasdaq 100 E-mini futures (/NQ): -0.39% 
2. 10-year T-note futures (/ZN): -0.26% 
3. Silver futures (/SI): -1.23% 
4. Crude oil futures (/CL): -1.69% 
5. Japanese yen futures (/6J): +0.57% 

One of the worst weeks of the year, at least during presidential election years, has arrived. The S&P 500 hasn’t had a positive second week of October during a POTUS cycle since 2000. And going back to 1928, the first half of October has been the second-worst two-week window of the year. That squalid seasonal backdrop may be contributing to the weak performance by equities today. Plus, it’s coupled with the ongoing rise in energy prices thanks to a ratcheting up of Israel-Iran tensions and a new Category 4 hurricane in the Gulf of Mexico.

Nasdaq futures (/NQZ4) fell this morning after a weak start to October last week, when the index closed nearly unchanged for the week. Amazon (AMZN) fell in pre-market trading after an analyst downgrade. Pfizer (PFE) rose over 3% after activist Starboard Value took a $1billion stake in the drugmaker, according to a report from The Wall Street Journal. Jeffries downgraded Apple (AAPL) sending the stock 1% lower ahead of the bell.  

Treasuries fell across the curve, pushing yields higher this morning. The 10-year T-note futures contract fell 0.32% before the New York opening bell. That pushed the underlying yield above 4% for the first time since early August. Bond traders are watching several potentially high-impact Treasury auctions due this week, with a three-year note offering tomorrow and a 10-year offering scheduled for Wednesday. Several Federal Reserve speakers are on tap today, which could influence the direction of rates. 

Silver prices (/SIZ4) struggled to start the week after last week pushed the dollar and yields sharply higher. Traders have reeled in expectations for a cut in interest rates and now expecting a single 25-basis-point rate hike at the next Fed meeting. The economy continues to outperform expectations and the odds of a recession are minimal, which has pressured Treasuries. Silver should see further gains as the Fed moves to cut rates, but the metal could be due for a pullback over the short term.  

Oil traders are coming off a big week of gains, and there are no signs of it stopping anytime soon. Last week, crude oil prices rose the most since early 2023, gaining over 9% over the five-day period. Israel continued its ground operations in Lebanon today as Hezbollah fired rockets into Haifa. Markets are on edge amid the one-year anniversary of the Gaza war, with some fearing the day could be marked by more violence. Meanwhile, the potential for strikes on Iranian oil facilities remains on the table but seems to be a more unlikely response option to last week’s attacks as time goes on.  

British Pound futures (/6BZ4) continued to fall on Monday, extending last week’s sell off. The currency took a hit when Bank of England (BOE) Gov. Andrew Bailey said the bank may have to cut rates faster than previously expected. Pound traders have been overwhelmingly bullish over the past couple of months, leading to a sharp unwind of longs after those comments crossed the wires. Recent job data from the United Kingdom isn’t helping to assuage fears that the BOE could be forced to cut more aggressively.  

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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