S&P 500 Futures stay firmer even as US Treasury yields struggle to keep post-Fed losses

• Global traders take a breather after Fed-inspired volatility recedes amid a lack of major data/events.
• S&P 500 Futures defend the latest gains in hopes of overcoming the inflation/growth fears.
• US Treasury yields fail to stretch post-Fed declines as traders eye more central banks to join the hawkish line.

Market sentiment dwindles during early Thursday, after witnessing a heavy dose of Fed-led volatility the previous day. The traders’ inaction could also be linked to the presence of not-so-impressive data/news during the Asian session, as well as the cautious mood ahead of the Bank of England (BOE) monetary policy meeting.

While portraying the mood, the US 10-year Treasury yields rebound from an intraday low of 3.288% to 3.364% by the press time. Even so, the benchmark bond coupons remain negative for the second consecutive day, down 3.1 basis points (bps) at the latest.

That said, the S&P 500 Futures track Wall Street’s gains with a 0.54% intraday run-up to 3,813 by the press time.

On Wednesday, the US Federal Reserve (Fed) announced the biggest interest rate hike since 1994 to battle inflation fears. The US central bank also revised up inflation forecasts for this year and the next while cutting down the inflation expectations. Further, the policymakers also signaled either a 50 bp or 75 bp rate hike in the next meeting. However, the Fed’s rejection of the odds of a 100 bp rate increase and Chairman Jerome Powell’s measured comments seem to have drowned the Treasury yields and the US dollar afterward.

Talking about the data, US Retail Sales marked a contraction of 0.3% MoM versus an anticipated growth of 0.2% and downwardly revised 0.7% in previous readings. Also, the NY Empire State Manufacturing Index dropped to -1.2 compared to 3.0 market consensus and -11.6 prior.

It’s worth noting that the market’s fears of central bankers’ aggression seem to have run out of steam as the higher interest rates are likely to be the new norm, especially after the recent hawkish performances of the major central banks including the Fed. The same should have helped the equity bulls to keep reins amid a sluggish session despite a rebound in yields.

Moving on, second-tier US data and the Bank of England’s (BOE) ability to surprise markets will be important to watch for intraday traders. However, Friday’s Bank of Japan (BOJ) monetary policy report and a speech from Fed Chairman Jerome Powell will be more important.

Also read: US recession in 2023 now seems more likely than not