S&P 500 Briefly Hits Fresh June High; Bonds Rally as Inflation Cools

Also, 10-year T-note, silver, crude oil and euro futures

1. S&P 500 E-mini futures (/ES): -0.07% 
2. 10-year T-note futures (/ZN): +0.28% 
3. Silver futures (/SI): -1% 
4. Crude oil futures (/CL): +2.15%  
5. Euro futures (/6E): +0.42% 

The May US inflation report came in cooler than anticipated, much to the delight of traders this morning. The consumer price index grew by 0.1% month-over-month (m/m) and 2.4% year-over-year (y/y), below forecasts of 0.2% m/m and 2.5% y/y. Core inflation missed as well, at 0.1% m/m and 2.8% y/y vs. 0.2% m/m and 2.9% y/y expected. Traders reacted by pushing up the odds of Federal Reserve cuts in interest rates for July and September; a June hold remains the most likely outcome by a wide margin. Benign inflation figures aside, news of a US-China trade deal agreement — basically, “we’re going to do what we said we would back in Geneva” — is doing little to spark any significant price action. 

S&P 500 futures (/ESM5) rose after this morning’s inflation report showed tariffs aren’t resulting in higher prices so far. Tensions between the US and China also cooled after Commerce Secretary Howard Lutnick said there is an outline of a deal with China after two days of negotiations in London. GameStop (GME) fell over 2% in pre-market trading after reporting a miss on its Q1 revenue. Quantum Computing (QUBT) rose over 13% after Nvidia (NVDA) CEO Jensen Huang said the industry was reaching an inflection point. Gitlab (GTLB) fell 13% after reporting poor Q2 results. 

10-year T-note futures (/ZNU5) rose 0.24% this morning with the softer-than-expected inflation report. The drop in yields came as fears of higher prices subsided, a view bolstered by the conclusion of trade negotiations in London between the US and China . Investors are waiting for the results of the Treasury’s 10-year note auction today. However, tomorrow’s 30-year bond auction will likely serve as the prime event for the week. Traders are keen to see how foreign demand will hold up as the United States pushes a new tax and spending package forward that is expected to raise the deficit. 

Silver prices (/SIN5) fell for a second day, dropping about 0.6% this morning. The decline follows a multi-day surge in the metal that saw prices rise to the highest level since 2012. Still, the metal is holding above recent swing highs from March and October of last year. If bulls can hold prices above the 36 handle, it might provide a new base for the next move higher, especially if we see the dollar continue to weaken. 

Crude oil prices (/CLN5) rose over 2% after President Donald Trump said the deal with China is done. If the deal is formalized, it would remove a major headwind from the energy market. Meanwhile, negotiations with Iran remain contentious, supporting a geopolitical risk premium in the price of crude. The American Petroleum Institute said that crude stockpiles dropped last week. Traders are waiting for data from the Energy Information Administration (EIA) to confirm the drawdown in inventories. 

Euro futures (/6EM5) advanced this morning, rising about 0.38% in early trading. Rate cut expectations for the European Central Bank (ECB) remain subdued. Olli Rehn, governor of the Bank of Finland, warned that the bank should not be complacent over inflation, aligning with ECB President Christine Lagarde’s sentiment on the rate outlook. The softer-than-expected inflation report in the US fueled expectations of a possible policy divergence between the two central banks, lifting the Euro.   

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