S&P 500 Extends Rebound, and Yields Drop as July PPI Moderates

Also, 30-year T-bond, silver, crude oil and British pound futures

1. S&P 500 E-mini futures (/ES): +0.6% 

2. 30-year T-Bbond futures (/ZB): +0.33% 

3. Silver futures (/SI): -0.94% 

4. Crude oil futures (/CL): -0.51% 

5. British pound futures (/6B): +0.31% 

U.S. equity markets rose this morning after traders digested the latest round of inflation data, this time via the producer price index (PPI). Price data is quickly getting pushed aside as an input to Fed rate cut bets, with traders now focused the economy and jobs. That could make this week’s retail sales report the most important print of the week. The dollar and Treasury yields fell. Crude oil prices reversed some of yesterday’s gains despite geopolitical tension remaining a factor after Iran went another night without responding to Israel.  

Symbol: Equities	Daily Change
/ESU4	+0.6%
/NQU4	+0.92%
/RTYU4	+0.8%
/YMU4	+0.29%

S&P 500 futures (/ESU4) rose this morning after a lighter-than-expected print on producer prices crossed the wires, easing concerns about inflation ahead of tomorrow’s inflation report. Home Depot (HD) dropped 1% in pre-market trading after the retailer cut its full-year sales outlook.  Starbucks (SBUX) rose nearly10% after the company announced a surprise shakeup in its leadership, tapping Brian Niccol from Chipotle (CMG). 

Strategy: (41DTE, ATM)	Strikes	POP	Max Profit	Max Loss
Iron Condor	Long 5050 p  Short 5100 p  Short 5750 c  Long 5800 c	65%	+490	-2010
Short Strangle	Short 5100 p  Short 5750 c	70%	+2250	x
Short Put Vertical	Long 5050 p  Short 5100 p	83%	+245	-2255

Symbol: Bonds	Daily Change
/ZTU4	+0.07%
/ZFU4	+0.16%
/ZNU4	+0.22%
/ZBU4	+0.33%
/UBU4	+0.29%

Bond yields are lower today because investors see this morning’s PPI data as additional evidence to support Federal Reserve interest rate cuts. Tomorrow’s inflation data is in focus for bond traders, as is retail sales data later this week. The 30-year T-bond futures contract (/ZBU4) rose 0.33% this morning, trimming four basis points from its underlying yield. Economic concerns might underpin retail sales data as the bigger data print for bond traders this week, as investors shift away from concerns about inflation. 
 

Strategy (38DTE, ATM)	Strikes	POP	Max Profit	Max Loss
Iron Condor	Long 118 p  Short 119 p  Short 129 c  Long 130 c	65%	+250	-750
Short Strangle	Short 119 p  Short 129 c	71%	+953.13	x
Short Put Vertical	Long 118 p  Short 119 p	86%	+125	-875

Symbol: Metals	Daily Change
/GCZ4	+0.31%
/SIU4	-0.94%
/HGU4	+1.88%

Silver prices (/SIU4) are retracing much of yesterday’s gains this morning despite a weaker dollar and lower Treasury yields. The optimism from last week’s ability to hold prices above a critical level of support could quickly fade if prices move closer to the 26.50 level. Meanwhile, China’s meddling in its fixed-income space isn’t a great sign to investors who see the move from China as a distortion of market signals. China is a key demand driver for silver.  

Strategy (43DTE, ATM)	Strikes	POP	Max Profit	Max Loss
Iron Condor	Long 24 p  Short 24.5 p  Short 30.5 c  Long 31 c	65%	+575	-1925
Short Strangle	Short 24.5 p  Short 30.5 c	73%	+3115	x
Short Put Vertical	Long 24 p  Short 24.5 p	88%	+195	-2305

Symbol: Energy	Daily Change
/CLU4	-0.51%
/HOU4	+0.12%
/NGU4	+1.69%
/RBU4	-0.93%

Crude oil prices (/CLU4) pulled back today as traders took stock following a five-day win streak. Geopolitical concerns remain as Israel waits for a response from Iran. OPEC cut its demand forecast for 2024 yesterday, and the International Energy Agency (IEA) cut its outlook for demand growth in 2025 this morning. Underlying metrics remain supportive for the crude complex, with prompt spreads in WTI and Brent crude oil making significant upside over the last week. U.S. inventory numbers from the American Petroleum Institute (API) are in focus for today.  

Strategy (65DTE, ATM)	Strikes	POP	Max Profit	Max Loss
Iron Condor	Long 67 p  Short 68 p  Short 87 c  Long 88 c	63%	+250	-750
Short Strangle	Short 68 p  Short 87 c	70%	+1900	x
Short Put Vertical	Long 67 p  Short 68 p	80%	+150	-850

Symbol: FX	Daily Change
/6AU4	+0.27%
/6BU4	+0.31%
/6CU4	+0.05%
/6EU4	+0.07%
/6JU4	-0.11%

British pound futures (/6BU4) rose after the United Kingdom printed a lower unemployment rate on Tuesday. Strong wage data is clouding the outlook on rate cuts from the Bank of England and leaves the Sterling in a relatively strong fundamental position vs. its peers. The technical structure also remains sound after the latest swing low marked a higher low from levels traded in late June. 

Strategy (52DTE, ATM)	Strikes	POP	Max Profit	Max Loss
Iron Condor	Long 1.24 p  Short 1.245 p  Short 1.315 c  Long 1.32 c	66%	+81.25	-231.25
Short Strangle	Short 1.245 p  Short 1.315 c	72%	+368.75	x
Short Put Vertical	Long 1.24 p  Short 1.245 p	92%	+37.50	-275

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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