S&P 500 Dips as Tech Earnings Miss Amid Fresh Trade War Concerns

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

1. S&P 500 E-mini futures (/ES): -0.28% 
2. 10-year T-note futures (/ZN): +0.24% 
3. Gold futures (/GC): +0.36% 
4. Crude oil futures (/CL): -1.31% 
5. Japanese yen futures (/6J): +0.72% 

The latest spate of earnings releases have done little to help keep the rebound in equity markets going into the middle of the week. On the trade war front, outgoing Canadian Prime Minister Justin Trudeau announced a joint Canada-U.S. economic summit on Friday. But perhaps more importantly, China has not been fixing the Chinese yuan at weaker levels in the wake of the 10% tariffs, a subtle indication China is not keen on escalating trade tensions (a weaker yuan could negate the entirety of the tariff impact with respect to trade flows).

Elsewhere, U.S. Treasury yields are breaking to their lowest level since the December Federal Open Market Committee (FOMC) meeting, proving to be a headwind for the U.S. Dollar.  

Disappointing earnings results from Alphabet (GOOGL) and Advanced Micro Devices (AMD) are bringing AI capital expenditure (capex) spending trends back into the spotlight. The Nasdaq 100 (/NQH5) is the worst performing index on the day, while the Russell 2000 (/RTYH5) remains the leader since the Sunday futures open. Meanwhile, the S&P 500 (/ESH5) has steadied after filling the gap from tariff tantrum open this week. 

Treasuries are up across the curve today, but the context of the advances is meaningful: Both 10-year notes (/ZNH5) and 30-year bonds (/ZBH5) have potentially breached the necklines of inverse head and shoulders patterns; or long-end yields are exhibiting signs of topping, having declined to their lowest level since the FOMC meeting on Dec. 18. A potential catalyst? The U.S. Treasury announced it would stick with the current size and schedule of its note and bond auctions “for at least the next several quarters.” Fed funds futures and Three-month SOFR futures (/SR3Z5) are discounting near a 90% chance of two 25-basis-point (bps) rate cuts in 2025. 

Gold prices (/GCJ5) hit a fresh record high in overnight trading, aided in part by the decline in U.S. yields and the softer U.S. dollar. The risk aversion in equity markets is helping to drive flows into gold as investors seek out safe-haven assets that could insulate their portfolios from volatility. If the disputes between the U.S. and China continue to worsen, it could push gold prices higher in the coming weeks and months. Data released today showed U.S. imports of precious metals hit an all-time high in December 2024. 

Crude oil prices (/CLH5) fell this morning after data showed U.S. job openings fell to a three-month low. Yesterday’s inventory data from the American Petroleum Institute (API) also showed rising U.S. stockpiles, which dampened sentiment for the energy complex as trade tensions between the U.S. and China ramped up. Economic concerns are overshadowing potential supply implications from the U.S. stance on Iran, which has reverted to a maximum pressure campaign that could take Iran’s oil supply off the global market. The prompt spread in crude, a proxy for demand, fell to its lowest level since December, underpinning concerns about the physical oil market, which represents near-term demand.  

It’s a classic risk-off tone in markets this morning, with the Japanese yen (/6JH5) gaining nearly 1% through morning trading. The safe-haven currency is pushing into the highest levels traded since December as traders sell equities and buy gold. Some disappointing earnings reports have traders on edge as equity prices linger near record highs. Meanwhile, bets increased that the Bank of Japan (BOJ) will hike rates again after some upbeat data on wages crossed the wires overnight.  

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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