S&P 500 Futures stays defensive around 4,100, US Treasury yields retreat amid sluggish markets

• Market sentiment remains downbeat amid fears of growth, inflation joining hawkish Fedspeak.
• Headlines concerning China, Russia also weigh on the risk appetite ahead of US ADP Employment data.
• S&P 500 Futures struggles to pause two-day downtrend, US 10-year Treasury yields ease from two-week top.

Global markets remain pressured as chatters surrounding recession join the hawkish Fedspeak and trade-negative headlines from China. It should, however, be noted that cautious sentiment ahead of the key US ADP Employment Change also adds to the risk-off mood but softer yields probe equity bears of late.

That said, the S&P 500 Futures struggles to defend the 4,100 level, up 0.10% around 4,110 by the press time, whereas the 10-year Treasury yields step back from a fortnight top after rising for three consecutive days, down 2.5 basis points (bps) to 2.905% at the latest.

Fed’s Beige book raised concerns over economic growth in the US as the majority of districts indicated slight or modest growth while most informed of continued price rises. Also, three districts, out of 12, expressed concerns about a US recession.

On the same line were comments from St. Louis Federal Reserve Bank President James Bullard also raised concerns about the US recession as he repeated that a pace of 50 bps hike per meeting is a “good plan” for now. Furthermore, Federal Reserve Bank of Richmond President Thomas Barkin mentioned, “You can't find a recession in the data or actions of business execs,'' speaking on Fox Business.

It should be noted that the strong US data tried to tame the recession fears but hawkish Fed concerns challenged the market’s optimism. That said, the US ISM Manufacturing PMI for April rose to 56.1 versus the 54.5 expected and the 55.4 prior. Further, the US JOLTs Job Openings eased below 11.8 prior readings but matched 11.4 market forecasts. 

Elsewhere, Reuters came out with the news suggesting the US readiness to implement a ban on Xinjiang goods whereas comments from China's Ambassador to Australia, Xiao Qian, hint at no relief to Aussie business houses from Beijing’s ban despite the change in government.

On a different page, the Wall Street Journal (WSJ) raised concerns over the easing in the US job numbers by saying, “Tightness in the labor market has started to ease with some hiring freezes, according to some firms.”

Looking forward, US ADP Employment Change for May, expected 300K versus 247K prior, will be eyed closed due to being the early signal for Friday’s US Nonfarm Payrolls (NFP). Also important to watch is the US Factory Orders for May bearing forecasts of a 0.7% increase compared to 2.2% in previous readouts.

Also read: US ADP Employment Change May Preview: The labor market recedes from center stage