S&P 500 Modestly Lower as Record Run Looks to Continue

Also two-year T-note, gold, crude oil and Euro futures

1. S&P 500 E-mini futures (/ES): -0.33% 

2. Two-year T-note futures (/ZT): -0.02% 

3. Gold futures (/GC): +0.76% 

4. Crude oil futures (/CL): -2.14% 

5. Euro futures (/6E): +0.25% 

The bull market is continuing for the longest time in history. The S&P 500 has rallied 17 of the past 21 weeks, gaining 27% during that timespan—something that has never happened before. At the start of this final week of March, the economic calendar thins out leaving catalysts lacking. A trio of bond auctions over the next few days could spark bond markets ahead of the February U.S. personal consumption expenditure (PCE) price index release later this week.

Elsewhere, despite modestly higher yields, the U.S. dollar is down today against each of its major counterparts. 

S&P 500 futures (/ESM4) were on track to open lower this morning as investors prepare for the next big data print that could shift Federal Reserve interest rate cut bets. The PCE is due out on Friday, with analysts expecting a 2.4% year-over-year increase to match the previous month’s reading.

We’ll also get durable goods orders tomorrow and an update to the fourth-quarter gross domestic product (GDP). The chip sector is facing headwinds today after a report surfaced that China is aiming to ban U.S. chips from being used in government computers, according to the Financial Times. Intel Corp. (INTC) is down nearly 5% in pre-market trading.  

Bonds are down to start the week, pushing up Treasury yields and depressing market sentiment. Like equity markets, bond markets have those economic data prints in focus. The spread between the two-year and 10-year yields—a classic recession predictor—has stayed inverted for 625 days, beating the previous record from the 1970s.

Today, the Treasury will auction 13- and 26-week bills, and two-year notes. The two-year note auction could have implications for two-year T-note futures (/ZTM4). 

Gold prices (/GCM4) rose nearly 1% this morning despite the up move in Treasury yields and a relatively strong dollar. The pullback in equity markets compared to the move in precious metals indicates investors are seeking some safety in the metals. The same story with economic data influencing Fed interest rate cut bets also applies to gold prices, making this a potentially volatile week of trading around event risks.  

Crude oil prices (/CLJ4) rose 0.5% to start the week after traders assessed events over the weekend linked to the Russia-Ukraine war. Ukraine attacked another Russian oil refinery last week, knocking out around half its capacity, according to Reuters. The attack is the latest in a string of offensive measures against energy targets from both sides.

Elsewhere, a potential cease fire agreement between Israel and Hamas fell apart after mediation efforts stalled.  

The Euro (/6EM4) started the week higher, lifting around 0.3% this morning as Euro Zone bond yields inched higher. Europe will have updated inflation data coming next week, but it’s all eyes on U.S. data this week.

However, European Central Bank (ECB) Chief Economist Philip Lane will speak tomorrow, and we will get consumer confidence data for the Euro Zone on Wednesday. 

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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