S&P 500 Loses Footing as Traders Await Trump Meeting with CEOs and Wall Street

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

1. S&P 500 E-mini futures (/ES): -0.17% 
2. Five-year T-note futures (/ZF): -0.08% 
3. Silver futures (/SI): +2.29% 
4. Crude oil futures (/CL): +1.35% 
5. Euro futures (/6E): +0.84% 

Reports of a CEO roundtable today in Washington may have helped markets stabilize overnight, but the latest escalation in the U.S.-led global trade war is souring the mood once again today. President Donald Trump stated that the aluminum and steel tariffs levied against Canada would increase to 50% from 25% tomorrow. Traders are continuing to digest the new world in which deglobalization undercuts U.S. exceptionalism in equity markets. Elsewhere, more U.S. dollar weakness (aside from the Canadian dollar) may be helping to prop up commodity prices. 

S&P 500 futures (/ESH5) failed to recover following yesterday’s sell-off that saw the contract make its biggest single day drop since December, falling 2.69% to start the week. Banks have started to lower their forecast on the U.S. stock market, with Citigroup (C) lowering their rating on the U.S. market to neutral from overweight.

President Trump conceded over the weekend that a recession is a possibility, sparking fear the protectionist policies being put in place could cause a disruption to the U.S. economy. Investors are waiting for inflation data scheduled for release tomorrow, which could affect Fed rate cut bets. Southwest Airlines (LUV) gained 9% in early trading after announcing the company would begin to charge customers for checked bags. 

Treasury yields rose this morning as bond traders sold U.S Treasuries. Traders expect to see more cooling in the U.S. labor market ahead of this week’s data prints. Five-year T-note futures (/ZFM5) fell 0.05% in early trading after closing at the highest level since October. A three -year note auction later today could have an impact across the belly of the curve. Tomorrow’s inflation data could also affect yields, as it can possibly influence the direction of Federal Reserve rate cut bets. 

Silver prices (/SIK5) surged 2.5% this morning as the dollar fell to challenge lows from October. Chinese leaders today approved a budget plan designed to support the country’s ailing economy. The spending and stimulus measures benefit silver prices because they’ll likely increase investment in the metal. If China can stimulate its way out of deflation, then silver should benefit in the months ahead as it benefits from risk-off flows around the U.S. market.

Crude oil prices (/CLJ5) climbed about 1% this morning but remain lower on the week following yesterday’s drop. A weaker dollar and some dip buying from around the 65 level is helping to buoy prices today. Investors are waiting to hear more from OPEC+ about their plans to bring back more supply onto the market starting in April. The drop in prices complicates the cartel’s decision, as more supply on the market may drive prices lower. Alexander Novak, deputy prime minister of Russia, said the group would go ahead with its April increase but could also consider other steps, including a cut to production. The American Petroleum Institute (API) is scheduled to release inventory data later today.  

Euro futures (/6EH5) resumed the previous uptrend to day as traders focus on a big spending package out of Germany to boost defense and energy infrastructure spending. Germany wants to exempt defense spending that is constrained by a constitutional rule, but there is already some pushback occurring from the recently defeated Green party. However, broader dollar weakness is allowing the euro to push higher despite the uncertainty around the spending package’s outcome.  

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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