S&P 500 Slides as Oil and Gold Rally Ahead of Fed Decision

Also, 30-year T-bond, gold, crude oil and euro futures

1. S&P 500 E-mini futures (/ES): -0.46% 
2. 30-year T-bond futures (/ZB): -0.25% 
3. Gold futures (/GC): +2.22% 
4. Crude oil futures (/CL): +4.38% 
5. Euro futures (/6E): +0.39% 

The first half of the week is quieter on the macroeconomic front, with the big event arriving Wednesday with the May Federal Reserve decision on interest rates. Until then, attention has been and remains on the lighter earnings calendar and chatter coming from Washington regarding tariffs and the debt limit (a point of interest for Treasury Secretary Scott Bessent today). Traders’ attention is less on stocks and more on commodities: Crude oil and gold have both staged aggressive rallies this week, while the U.S. dollar has continued to stumble. In a sense, the “Sell America” trade is back: Stocks, bonds and the greenback are down while gold is up.

S&P 500 futures (/ESM5) fell by 1% in early trading today as traders digested the most recent economic data, which showed the U.S. trade war is affecting the trade deficit. That deficit grew 14% in March from the previous month, according to data from the Commerce Department. Celsius Holdings (CELH) fell nearly 4% after missing first quarter sales expectations. Palantir Technologies (PLTR) sank over 13% on a poor earnings announcement. Ford Motor (F) rose in early trading after trimming earlier gains after the automobile maker suspended its guidance for the year. 

The long end of the Treasury curve continued to move lower today despite the trade data. 30-year T-bond futures (/ZBM5) fell 0.35%, pushing the underlying yield to a two-week high as traders see a more resilient economy than previously feared. Last week’s jobs report remains in focus for bond traders who see the labor market keeping the Fed’s policy projection on pace. Traders expect the central bank to keep rates unchanged tomorrow. The market expects Fed Chair Jerome Powell to maintain a similar tone for this press conference because it’s too early to assess how trade-related changes will affect the economy. 

The risk aversion in equity markets, a lower dollar and a steady pace on the outlook for Fed rate cuts is helping to lift gold prices (/GCM5) this morning, increasing the price of the metal by about 2% in early trading. Fear of the U.S. trade war and its impact on the global economy remain a potent driver for inflow of the metal, as traders lose faith in U.S. assets. Gold is up about 27% since the start of the year and traders expect the metal to continue to thrive as we move to lower interest rates.  

Crude oil prices (/CLM5) recovered this morning, jumping over 4% as traders buy the commodity following Monday’s dip. Fear of oversupply had injected uncertainty into the commodity’s outlook following OPEC’s move to roll back production cuts. China’s market reopened after a holiday, which may have brought some buyers online who decided to scoop up barrels at the low prices. The American Petroleum Institute (API) is expected to report inventory data later today, with forecasters seeing a drop of 2.5 million barrels.  

Euro futures (/6EM5) remained higher despite trimming earlier gains that were surrendered after Germany’s Friedrich Merz failed to get enough votes for a majority in the German government. The development could mean a slowdown in boosting the country’s fiscal spending on defense, which has supported the euro this year. Broader dollar strength also worked in the euro’s benefit. All eyes in the foreign exchange market are on the Fed’s interest rate announcement.  

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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