S&P Hits Record High, Bonds and Gold Rally as Rate Cut Bets Fuel Risk-On Move

Also 10-year T-Note, Gold, Crude Oil, and British Pound Futures 

1. S&P 500 E-mini futures
2. 10-year T-Note futures (/ZN): +0.36%
3. Gold futures (/GC): +0.51%
4. Crude Oil futures (/CL): -0.57%
5. British Pound futures (/6B): +0.65

A risk-on move defined Wednesday morning trading in financial markets, with the S&P 500 reaching fresh record highs and small-cap stocks surging as rate cut bets fueled buying across equity markets. The dollar dropped as Treasury yields fell, and precious metals moved higher on hopes that the Federal Reserve will tilt further into a dovish outlook. Tomorrow’s PPI report is in focus after a solid earnings season dispelled economic slowdown fears. Trade fears took a backseat, with market bulls betting that Fed cuts will mitigate a slowing economy.  

S&P 500 futures (/ESU5) rose into fresh record highs Wednesday morning, rising about 0.37% in the first hour of trading. Treasury Secretary Scott Bessent, on a Bloomberg interview this morning, said that the Fed should lower rates by at least 150 basis points. Healthcare, materials, and consumer discretionary stocks led the gains, while consumer staples lagged. CoreWeave (CRWV) dropped over 12% after the company’s leadership said that growth is capped by a supply shortage. Cava Group (CAVA) fell 17% after missing estimates for revenue and same-store sales. Cisco Systems (CSCO) will report earnings after the bell today.  

Bonds rose this morning, with the comments from Scott Bessent helping to fuel positive sentiment for Treasuries. The upcoming annual Jackson Hole event will help to shape the rate cut outlook, which poses the biggest event risk for rate cut bets. Tomorrow’s PPI data will also help to inform the outlook. 10-year T-Note futures (/ZNU5) rose 0.3% in early Wednesday trading. As long as we don’t get a big upside surprise, Treasuries should continue to push higher, as evidenced by price action today following yesterday’s inflation report.  

Gold prices (/GCZ5) pushed higher despite a risk-on tone across markets. The drop in Treasury yields is helping to support buying in precious metals Wednesday morning, and traders see a dovish path for rate cuts as being supportive for the metal. Prices traded at the 9- and 21-day exponential moving averages, putting gold up against some possible resistance. Clearing those EMAs would likely help to invite further strength, but tomorrow’s PPI data poses a potential hurdle for traders.  

Crude oil prices (/CLU5) fell 0.5% Wednesday morning to build on losses from the prior session. Prices are trading near the lowest levels since June, as concerns over the economy weigh on sentiment. The International Energy Agency (IEA) raised its supply growth forecast for this year while also trimming the demand side of the equation, noting subdued fuel demand. The Energy Information Administration (EIA) will release its weekly inventory report today, which could influence prices through the rest of the week. Meanwhile, traders remain focused on the upcoming meeting between President Trump and President Putin, which could lead to a ceasefire in Ukraine and start the process of easing sanctions on Russian energy products.  

The move higher in Treasuries helped to fuel strength in the British Pound, as traders see the Fed easing at a faster rate than the Bank of England (BoE). British Pound futures (/6BU5) traded at the highest level since late July after rising 0.62% this morning. Traders see rates for both central banks being near equal by the end of the year. The United Kingdom will release GDP data on Thursday, posing a potential catalyst for more gains in the currency.  

 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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