S&P 500 Futures, Treasury bond yields depict market’s anxiety ahead of key catalysts

• Market sentiment remains divided as traders await BoJ decision, US Retail Sales and PPI.
• S&P 500 Futures print mild losses after reversing from a one-month high the previous day.
• US 10-year Treasury bond yields grind higher following three-day uptrend.
• Mixed concerns surrounding China, Fed also challenge momentum traders.

The risk profile remains unclear as market players await crucial data/events early Wednesday. Also challenging the sentiment could be the unclear signals about China and the US Federal Reserve.

While portraying the mood, the S&P 500 Futures print mild losses of around 4,003 by the press time, after reversing from a one-month high the previous day. Additionally, the benchmark 10-year US Treasury bond yields defends Tuesday’s nearly four basis points (bps) of an upside to 3.55% at the latest.

It should be noted that the Japanese Government Bond (JGB) yields remain sidelined near 0.50% after the benchmark 10-year JGB poked the highest levels since June 2014 the previous day while flashing 0.59% figure, just above the upper limit of the BoJ’s desired range.

Amid these plays, the US Dollar Index seesaws around 102.35-40 after staying on the bull’s radar in the last two days. Furthermore, the WTI crude oil also prints mild losses near $81.15 while the Gold price treads water around $1,910.

Other than the cautious mood ahead of the aforementioned key catalysts, already up on the calendar, the downbeat prints of the New York manufacturing data, namely the Empire State Manufacturing Index for December, join mixed concerns over China to challenge the risk appetite.

That said, the NY Fed’s business gauge dropped sharply in January to -32.9 versus -4.5 market forecasts and -11.2 prior readings. The data also pushed the Federal Reserve Bank of Richmond’s President and CEO Thomas Barkin to state, “My hope is that we have passed the peak of inflation.” As a result, the US Dollar bulls had a tough ride.

On the other hand, expectations of upbeat growth figures from China, as conveyed by economists from Goldman Sachs of late, join the fears of more Sino-American tussles over Taiwan. Earlier in the day, South China Morning Post (SCMP) mentioned that Beijing ‘should be wary’ as the US and Taiwan seeks closer economic ties.

Moving on, the Bank of Japan’s (BoJ) monetary policy announcements could offer immediate directions to the markets and are more important considering the latest tweak to its Yields Curve Control (YCC). Following that, US Retail Sales and PPI, expected 0.1% and -0.1% MoM versus -0.6% and 0.3% respective priors, could entertain the market players during a likely busy Wednesday.