S&P 500 Wavers on Israel-Iran Headlines as Traders Eye FOMC and Monthly Opex

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

1. S&P 500 E-mini futures (/ES): -0.25% 
2. 10-year T-note futures (/ZN): +0.1% 
3. Silver futures (/SI): +1.83% 
4. Crude oil futures (/CL): +2.83% 
5. Euro futures (/6E): -0.54% 

The week is only beginning, even if it’s Tuesday. That’s because the most important events are set to hit the tape over the next 48 hours: The June Federal Open Market Committee (FOMC) meeting tomorrow should bring the usual fireworks; VIXpiration arrives tomorrow as well; and monthly options expiry is at the end of the week (notwithstanding Thursday’s day off for Juneteenth). Against this backdrop, Israel-Iran war headlines continue to dominate the energy scene, with crude oil prices rallying close to 3%. President Donald Trump left the G7 meeting in Canada to focus on the American military buildup in the Middle East; odds of American intervention against Iran are rising. 

S&P 500 futures (/ESU5) fell after US retail sales data disappointed the market by posting a 0.9% decline for May from the previous month. The conflict between Israel and Iran is also weighing on sentiment because some speculate the US may get involved in the coming days. Enphase Energy (ENPH) dropped over 27% in early trading. Renewable energy incentives would be phased out under the Senate’s version of Trump’s tax and spending bill. Other solar stocks like First Solar (FSLR) were also down sharply.  Eli Lilly (LLY) will acquire Verve Therapeutics (VERV), which sent the stock over 70% higher this morning. Tesla (TSLA) dropped after Wells Fargo (WFC) cut the car maker’s outlook. 

Treasuries were higher across the curve, but traders trimmed stronger overnight gains after retail sales data crossed the wires. 10-year T-note futures (/ZNU5) were 0.14% higher in early trading. The gains come late last week after yields fell to their lowest levels since early May. The Treasury will auction five-year Treasury inflation protected securities (TIPS) today. The focus for bond traders is tomorrow’s FOMC interest rate decision, which will come alongside updated economic projections. 

Silver prices (/SIN5) surged nearly 2% higher to put the metal near the highest levels traded since 2011. The underwhelming retail sales data this morning dented the US economic outlook, but prices persisted higher, while gold prices lagged. The divergence from gold prices, which were down about 0.2%, drove the gold/silver ratio down to levels traded last week. Tomorrow’s FOMC announcement poses a risk for the metal and may invite some profit taking ahead of the event. 

Crude oil prices (/CLQ5) rose nearly 3% this morning as the conflict in the Middle East props up a risk premium in the commodity. Meanwhile, data from China shows the country is importing more crude than it needs, meaning it is likely adding to stockpiles. Traders are waiting for data from the American Petroleum Institute (API) due today. Iran’s oil infrastructure has been largely untouched during the current conflict, but traders are worried oil flows through the Strait of Hormuz could materialize if the conflict escalates. 

Euro futures (/6EU5) fell this morning despite the weak reading on US retail sales. The euro is trading near the yearly highs reached last week, as traders start to pull back on interest rate cut bets for the European Central Bank (ECB). Meanwhile, ECB policymakers have pushed back on the notion that the euro could challenge the dollar’s reserve currency status. There is some concern inflation in Europe could undershoot, given the strong exchange rate, but policymakers have also pushed back against that outlook.  

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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