S&P 500 Futures drop back to 3,800 as recession fears battle US holiday during key week

• S&P 500 Futures reverse the previous day’s corrective pullback as recession fears amplify.
• US ISM PMIs amplified recession fears but failed to weigh on equities amid softer yields, preparations for earnings season.
• Light calendar, fresh geopolitical concerns strengthen the risk-off mood.

Market sentiment remains fragile during Monday’s Asian session as traders await the key data/events while struggling for fresh impetus during the US holiday.

While portraying the mood, the S&P 500 Futures drop 0.80% intraday to 3,800, reversing the previous day’s corrective pullback from a two-week low.

It’s worth noting that Wall Street managed to cheer softer US PMIs while bracing for the Q2 earnings session. However, the market’s economic pessimism and cautious mood ahead of this week’s Monetary Policy Meeting Minutes from the Fed and the European Central Bank (ECB), as well as the US jobs report for Jun, appear to weigh on the risk profile of late.

Further, Russia’s claim of having complete control over Lysychansk and news suggesting an increase in covid cases in China’s Anhui province exerts additional downside pressure on the market sentiment.

On Friday, the US ISM Manufacturing PMI for June slumped to the lowest levels in two years, to 53.0 versus 54.9 expected and 56.1 prior. The details suggested the Employment Index declined to 47.3 from 49.6 and New Orders Index fell to 49.2 from 55.1. Finally, Prices Paid Index dropped to 78.5 from 82.2, versus market forecasts of 81.0. It should be noted that the final readings of the S&P Global Manufacturing PMI for June dropped to the lowest level since July 2020, to 52.7 versus the flash estimate of 52.4 and 57 in May.

It’s worth noting that the ANZ Bank said, “Surveyed data from both PMIs and the US ISM are all pointing to faltering orders growth, lower backlogs of work indices and softer production over the summer. It is hard to escape the growing growth pessimism, which is also fanning expectations of a peak in both inflation and central bank hawkishness.”

Following the data, Wall Street posted surprise gains but the US Treasury yields remained pressured below 3.0% to mark the biggest weekly fall since February.

Moving on, the US Independence Day holiday could restrict market moves but the economic fears and fresh fears could keep the risk profile weak, which in turn might help the US dollar to remain firmer.