S&P 500 Weighed Down by Rise in Yields
S&P 500 Weighed Down by Rise in Yields
Also two-year T-note, gold, natural gas, and British pound futures
- S&P 500 E-mini futures (/ES): -0.27%
- Two-year T-note futures (/ZT): -0.10%
- Gold futures (/GC): -0.98%
- Natural gas futures (/NG): -1.20%
- British pound futures (/6B): -0.65%
It’s more of the same today as traders continue to reassess the near-term path of Federal Reserve interest rates cuts in the wake of the strong, if not superficial, January U.S. jobs report. U.S. equities appear to be falling in line with other asset classes, which otherwise moved in unison at the end of last week when rising bond yields helped prop up the U.S. dollar and weigh in on gold prices. The coming days will produce an extremely light macroeconomic calendar, keeping the focus on speeches from Federal Reserve policymakers as well as the smattering of earnings reports scheduled for release.
Symbol: Equities | Daily Change |
/ESH4 | -0.27% |
/NQH4 | -0.15% |
/RTYH4 | -0.95% |
/YMH4 | -0.26% |
S&P 500 (/ESH4) moved lower this morning after Federal Reserve Chair Jerome Powell said the central bank would likely wait until beyond March to bring down interest rates. The move lower comes despite some upside across European markets overnight.
Strategy: (46DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 4950 p Short 4960 p Short 5070 c Long 5080 c | 19% | +375 | -125 |
Short Strangle | Short 4960 p Short 5070 c | 50% | +6025 | x |
Short Put Vertical | Long 4950 p Short 4960 p | 64% | +150 | -350 |
Symbol: Bonds | Daily Change |
/ZTH4 | -0.10% |
/ZFH4 | -0.30% |
/ZNH4 | -0.48% |
/ZBH4 | -1.03% |
/UBH4 | -1.38% |
The renewed uncertainty over the U.S. interest rate cut timeline is keeping pressure on Treasuries. There isn’t too much economic data due this week, so traders will be keeping a close eye on any comments from Federal Reserve policymakers, with several set to speak through the week. The rate-sensitive two-year T-note futures (/ZTH4) fell 0.10% ahead of the opening bell. Later today, Chicago Federal Reserve President Austan Goolsbee will appear on Bloomberg. The Treasury will auction off 13- and 26-week T-bills today.
Strategy (46DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 102.25 p Short 102.5 p Short 103.75 c Long 104 c | 49% | +203.13 | -296.88 |
Short Strangle | Short 102.5 p Short 103.75 c | 58% | +546.88 | x |
Short Put Vertical | Long 102.25 p Short 102.5 p | 91% | +140.63 | -359.38 |
Symbol: Metals | Daily Change |
/GCJ4 | -0.98% |
/SIH4 | -1.76% |
/HGH4 | -1.02% |
Gold futures (/GCJ4) broke into new lows for February after selling off more than 1% this morning as Treasury yields and the dollar rose, pressuring the non-interest-bearing asset. Traders will look for prices to hold near January lows around 2,023. The metal will likely remain sensitive to interest rate cut expectations, which puts Federal Reserve speakers in the spotlight for precious metals traders amid a light economic calendar.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1990 p Short 2000 p Short 2060 c Long 2070 c | 32% | +640 | -360 |
Short Strangle | Short 2000 p Short 2060 c | 56% | +3960 | x |
Short Put Vertical | Long 1990 p Short 2000 p | 71% | +340 | -660 |
Symbol: Energy | Daily Change |
/CLH4 | -0.03% |
/HOH4 | +1.09% |
/NGH4 | -1.20% |
/RBH4 | +0.47% |
Natural gas futures (/NGH4) fell over 1% to start the week but bulls might gain some momentum soon as temperature forecasts for the middle of the month shift to a colder outlook for much of the United States. A so-far mild winter has tempered prices and kept inventory levels above five-year averages, which has cut bullish bets among fund managers. If the forecasts shift colder, we may see some upside in the coming days.
Strategy (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.8 p Short 1.85 p Short 2.25 c Long 2.3 c | 35% | +280 | -220 |
Short Strangle | Short 1.85 p Short 2.25 c | 56% | +1800 | x |
Short Put Vertical | Long 1.8 p Short 1.85 p | 64% | +140 | -360 |
Symbol: FX | Daily Change |
/6AH4 | -0.44% |
/6BH4 | -0.65% |
/6CH4 | -0.36% |
/6EH4 | -0.44% |
/6JH4 | -0.11% |
British Pound futures (/6BH4) are not benefiting from a pullback in rate cut expectations for the Bank of England (BOE), which are sending Gilt yields higher. That isn’t enough for the pound against a dollar that is strengthening from a similar narrative across the pond. /6BH4 is pushing into December lows, representing a significant technical breakdown that it may not recover from quickly.
Strategy (32DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.225 p Short 1.23 p Short 1.28 c Long 1.285 c | 65% | +87.50 | -225 |
Short Strangle | Short 1.23 p Short 1.28 c | 71% | +306.25 | x |
Short Put Vertical | Long 1.225 p Short 1.23 p | 89% | +43.75 | -268.75 |
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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