S&P 500 Stalls After Economic Data Bolsters Fed Cut Bets
S&P 500 Stalls After Economic Data Bolsters Fed Cut Bets
Also, 10-year T-note, gold, crude oil and Japanese yen futures
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- S&P 500 E-mini futures (/ES): -0.21%
- 10-year T-note futures (/ZN): +0.36%
- Gold futures (/GC): +0.53%
- Crude oil futures (/CL): -3.08%
- Japanese yen futures (/6J): +0.61%
A flood of economic data has sent the odds slightly higher for bets on a Federal Reserve cut in interest rates. Wholesale prices fell in April, according to the producer price index (PPI), which printed a decline of 0.5% from the prior month. Retail sales data printed a tepid 0.1% gain from the previous month. The data sent Treasury yields and equity markets lower. The market sees a Fed that is more inclined to cut rates as a bad sign for the market because it would likely be driven by concern about the economy instead of a soft-landing scenario. For now, the effect of tariffs on the economy remains a pain point for the market.
Symbol: Equities | Daily Change |
/ESM5 | -0.21% |
/NQM5 | -0.31% |
/RTYM5 | -0.30% |
/YMM5 | -0.17% |
S&P 500 futures traded lower this morning following four sessions of gains. The mood reflects a cautious optimism among traders. Foot Locker (FL) rose over 80% in early trading after a merger with Dick’s Sporting Goods (DKS). United HealthGroup (UNH) continued to decline, falling 17% after the turbulent exit of its CEO and the withdrawal of guidance.
Strategy: (46DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 5850 p Short 5875 p Short 6025 c Long 6050 c | 18% | +925 | -325 |
Short Strangle | Short 5875 p Short 6025 c | 49% | +9325 | x |
Short Put Vertical | Long 5850 p
| 60% | +375 | -875 |
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Symbol: Bonds | Daily Change |
/ZTM5 | +0.10% |
/ZFM5 | +0.22% |
/ZNM5 | +0.36% |
/ZBM5 | +0.22% |
/UBM5 | +0.24% |
Treasury futures rose and yields fell as bond traders priced in a slightly more aggressive path of rate cutting for the Federal Reserve following this morning’s economic data. The reduction in factory-gate prices gives the Fed a bit more room to cut if the economy falls into decline. The retail sales figures suggested consumers are pulling back on spending. The pullback may be because of concern over tariffs and the current administration's shift in spending priorities. Meanwhile, bond traders have their eyes on Congress where a new tax plan is being crafted.
Strategy (36DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 109 p Short 109.5 p Short 110.5 c Long 111 c | 27% | +359.38 | -140.63 |
Short Strangle | Short 109.5 p Short 110.5 c | 55% | +1359.38 | x |
Short Put Vertical | Long 109 p Short 109.5 p | 68% | +171.88 | -328.13 |
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Symbol: Metals | Daily Change |
/GCM5 | +0.53% |
/SIN5 | +0.18% |
/HGN5 | -0.09% |
Gold prices (/GCM5) rose today as yields and the dollar fell. The move makes sense, given the selling across equity markets. The safe-haven appeal of the metal is back in play after the retail sales figures underscored a potential softening in consumer spending, which could precede deeper cuts in economic activity. Gold prices bounced at the 50-day simple moving average (SMA), a level that supported prices back in April before gold went on to make all-time highs.
Strategy (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 3180 p Short 3185 p Short 3290 c Long 3295 c | 21% | +390 | -110 |
Short Strangle | Short 3185 p Short 3290 c | 57% | +11360 | x |
Short Put Vertical | Long 3180 p Short 3185 p | 61% | +210 | -290 |
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Symbol: Energy | Daily Change |
/CLN5 | -3.08% |
/HOM5 | -1.97% |
/NGM5 | -0.09% |
/RBM5 | -2.37% |
Crude oil prices (/CLN5) fell over 3% this morning. The retail sales data was concerning, but negotiations between the United States and Iran are removing geopolitical uncertainty from the market. The US may roll back sanctions on Iran. President Trump said this week that his administration is close to a deal with Tehran. A build in US inventories is also putting pressure on the commodity after the Energy Information Administration (EIA) released its inventory report yesterday.
Strategy (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 58.5 p Short 59 p Short 63 c Long 63.5 c | 20% | +400 | -100 |
Short Strangle | Short 59 p Short 63 c | 54% | +5040 | x |
Short Put Vertical | Long 58.5 p Short 59 p | 56% | +190 | -310 |
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Symbol: FX | Daily Change |
/6AM5 | -0.43% |
/6BM5 | +0.06% |
/6CM5 | -0.15% |
/6EM5 | +0.06% |
/6JM5 | +0.61% |
The Japanese yen (/6JM5) continued to move higher because traders see Japan’s economy as conducive to rate hikes from the Bank of Japan. At the same time, rate cut bets for the US increased. This behavior would likely decrease the US yield premium in bonds vs. Japanese counterparts. Japanese inflation data released earlier this week supported the outlook for higher rates.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.115 p Short 1.12 p Short 1.135 c Long 1.14 c | 25% | +462.50 | -162.50 |
Short Strangle | Short 1.12 p Short 1.135 c | 55% | +2362.50 | x |
Short Put Vertical | Long 1.115 p Short 1.12 p | 67% | +250 | -375 |
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Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. #@fxwestwater
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