S&P 500 Grinds Higher After Fed Chair Powell Speech

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

1. S&P 500 e-mini futures (/ES): +0.14%
2. 10-year T-note futures (/ZN): -0.01% 
3. Gold futures (/GC): -0.21%
4. Crude oil futures (/CL): -0.93%
5. Japanese yen futures (/6J): -0.32%

The much-hyped speech by Federal Reserve Chair Jerome Powell this morning yielded nothing by way of commentary on monetary policy. 

While that may be a disappointment, it also seemed unlikely that traders should have expected a dramatic shift in tone given that Fed Chair Powell spoke just a week ago at the November Federal Open Market Committee (FOMC) press conference. He takes the podium again tomorrow at 2 p.m. Eastern Time/1 p.m. Central Time.

A week of S&P 500 gains

Seven consecutive days of gains in the S&P 500 (/ESZ3)—the best streak in two years—are being greeted by a potential eighth-consecutive move higher as North American trading begins on Wednesday. 

Three of the four major indexes were trading above water in the futures market ahead of the cash bell, though gains were relatively modest. The Russell 2000 (/RTYZ3) is struggling for a third day in a row even as long-end U.S. bonds rally.

Bond yield curve twists

Powell’s lack of commentary on rate hikes or cuts may be a letdown for some, by bond traders are relatively unmoved in either direction. 

There’s some slight twisting of the yield curve on Wednesday, with the bull flattener continuing to make its way through markets; the 2s10s spread (the difference between the 10-year yield and the 2-year yield) is back to -37 bps. Once more, 30s (/ZBZ3) and ultras (/UBZ3) are the biggest movers on the session.

Gold price remains down

Gold prices (/GCV3) remain down slightly after Powell offered no comments on monetary policy this morning when speaking. The week lacks any notable catalyst for precious metals, but tomorrow’s jobless claims data may nudge prices in a different direction. For now, a rising dollar and short-term Treasury yields are working against gold prices.

Oil prices fall

Oil prices (/CLV3) fell about $0.46 per barrel, or 0.59%, Wednesday morning as traders digested the latest inventory data from the American Petroleum Institute (API), which showed an 11.9-million-barrel build for crude oil and a one-million-barrel build for distillates. 

Gasoline stocks fell by 400,000 barrels, but signs elsewhere point to cooling demand and refiners are preparing to scale back run rates ahead of further expected demand weakness. The Energy Information Administration’s weekly inventory report won’t be released today due to system maintenance.

Despite a contraction in yield premium between Treasuries and Japanese government bonds Japanese yen futures continue to decline. That is likely a frustrating development for Japanese policy makers who have kept a close eye on the sliding currency at a time when they are carefully trying to find an exit from ultra-loose monetary policy. 

The Bank of Japan's summary of opinions for its latest policy meeting is due out later today, which could influence the Japanese yen (/6JZ3). 

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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