S&P 500 Futures struggle around 4,150 as Treasury bond yields approach 3.0% mark

• Market sentiment dwindles amid a lack of major catalysts.
• S&P 500 Futures pause two-day recovery, US 10-year Treasury yields rebound.
• Chatters surrounding inflation and central bank moves may entertain traders ahead of ECB, US inflation.

Global markets remain sluggish as traders seek fresh clues during early Wednesday. However, widening fears of tighter monetary policy at the US Federal Reserve (Fed) renew the US Treasury yields’ upside momentum, which in turn challenges the riskier assets.

While portraying the mood, US 10-year Treasury bond yields rise two basis points (bps) to 2.99% after snapping a six-day downtrend the previous day. That said, the S&P 500 Futures print the first negative daily performance in three, down 0.15% around 4,150 at the latest.

A record slump in the US trade deficit and hopes of an upbeat US budget seemed to have recalled the US Treasury bond sellers. The US trade deficit for April marked the historical fall of 19.1% to USD87.1bn the previous day. Elsewhere, US Treasury Secretary Janet Yellen and hopes of faster economic recovery in China tried to defend the market optimists. On Tuesday, US Treasury Secretary Yellen testified on the Fiscal Year 2023 Budget before the Senate Finance Committee while saying that the US economy faces challenges from "unacceptable levels of inflation", as well as headwinds from supply chain snags. The policymaker added, “An appropriate budget is needed to complement Fed’s actions to tame inflation without harming the labor market.”

It should be noted that comments from World Bank (WB) President David Malpass who warned that faster-than-expected tightening could push some countries into a debt crisis similar to the one seen in the 1980s seemed to have weighed on the quote of late. On the same line could be the risk-negative news from Ukraine. “Kyiv says it has not yet reached any agreement with Russia or Turkey to allow the safe passage of its grain ships in the Black Sea, injecting skepticism into a push by the U.N. to create a vital food corridor,” said Politico.

To sum up, the market’s anxiety ahead of Thursday’s European Central Bank (ECB) meeting, as well as Friday’s US Consumer Price Index (CPI) for May, seems to grind the moves. However, the US Treasury yields and the US dollar appear to benefit from the cautious mood. That said, headlines concerning China and Russia may offer intermediate directions.