S&P 500 Sees Profit-Taking at End of First Green September Since 2019

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

1. S&P 500 E-mini futures (/ES): -0.16% 

2. 10-year T-note futures (/ZN): -0.06% 

3. Gold futures (/GC): -0.24% 

4. Crude oil futures (/CL): +0.28% 

5. Japanese yen futures (/6J): -0.49% 

Another blistering quarter for U.S. equity markets is coming to an end, with the S&P 500 wrapping up gains of more than 4% for the seventh time in the past eight quarters. Moreover, the S&P 500 could be entering October with a gain of over 20% year-to-date, which in context of presidential election years, may setup a seasonal headwind for October (more on that in the October seasonality report, released later today). Elsewhere, the Chinese stimulus spigot continues to flow, supercharging emerging market equities (but especially Chinese stocks, which are now outperforming the S&P 500 YTD). Escalating tensions in the Middle East seem to have little sway over commodities now. 

S&P 500 futures (/ESZ4) fell to start the week this morning, dropping by about 0.20% ahead of the opening bell. Still, September is on track to record one of the first gains in several years, bucking a bearish trend of seasonality. Stellantis (STLA) fell nearly 13% in pre-market trading after the Jeep maker warned that profits would decrease. Meanwhile, China-linked equities are on the move higher after China’s main indexes posted big gains overnight as investors remain excited about recent stimulus efforts. 

10-year T-note futures were lower to start the week but remain on track to record a gain for September, which would mark the fifth monthly advance for the instrument. The chances for a 50-basis point rate cut at the November Federal Open Market Committee (FOMC) meeting dropped from just above 50% last week to about 37% this morning. The trimming in that bet has come amid strong economic indicators, but it may also slow the movement in the bond market. Do treasuries have some room for a small retracement in October? 

Gold futures (/GCZ4) fell as the dollar moderated to start the week. Chinese equity performance may also be acting as a headwind, with demand for stocks in China shifting some capital from the metal. Despite this morning’s pullback, gold prices are set to put in a third monthly gain as the metal remains near all-time highs. Purchasing managers’ index (PMI) figures are in focus ahead of this Friday’s U.S. jobs report, which could reshape the narrative on the metal, although we likely remain biased higher as the Fed is widely expected to keep cutting rates. 

Crude oil futures (/CLZ4) are about to record the biggest monthly loss since October, down over 7.5% with less than one full trading day left. Stimulus from China is helping its stock market, but the impact isn’t being celebrated the same for the physical commodity, which requires a genuine rebound in demand. The market remains focused on OPEC as the cartel prepares to roll back its production cuts later this year despite softer prices. Meanwhile, geopolitical tensions in the Middle East have failed to materialize in the oil market, with traders believing that Iran will opt to respond to the recent strikes against Hezbollah leadership with a measured tone instead of seeking revenge.  

The Japanese yen (/6JZ4) is retracing some of its gains from Friday after yen bulls pushed the currency higher after news that fiscal support would be offered by the government if necessary. Those fiscal measures would be aimed at supporting household wages, which would then likely help its central bank in its path to higher rates. Friday’s move was the biggest in several weeks, making a retracement today unsurprising. The dollar, with the U.S. jobs report, will likely be the driver for the currency markets this week.  

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.