S&P 500 Futures struggles to cheer US President Biden’s SOTU even as yields retreat

• Market sentiment remains dicey even as US President Joe Biden tried to please American voters.
• Biden’s SOTU advocates billionaire minimum tax, sounds tough on China and shows readings to work with Republicans.
• Mixed Fedspeak, light calendar allows US bond sellers to take a breather and weigh on yields.
• Wall Street closed positive despite mixed earnings, S&P 500 Futures print mild losses.

Risk profile remains sluggish during early Wednesday as traders seek clear directions amid no concrete positives from US President Joe Biden’s State of the Union (SOTU) speech. Adding strength to the market’s indecision could be the lack of major data/events.

Even so, the S&P 500 Futures print mild losses near 4,170 while paring the biggest daily jump in nearly a week whereas the US 10-year Treasury bond yields snap a three-day uptrend while retreating from a one-month high of around 3.68% to 3.66% by the press time.

In his first joint session of Congress, since Republicans took control of the House of Representatives in January, US President Biden showed readiness to work with them for the betterment of America. The policymaker also pushes for the billionaire minimum tax while trying to show a tough stand on China if the dragon nation undermines the US sovereignty.

Here’s the live stream piece: US State of the Union 2023: President Joe Biden speech live stream – February 8

US President Biden previously tried to placate fears of another round of Sino-American tussles by saying, “The balloon incident does not weaken US-China relations.” However, China’s rejection of the Pentagon’s request keeps the geopolitical tension high and teases US Dollar buyers. “China has declined a US request for a phone call between US Defense Secretary Lloyd Austin and Chinese Defense Minister Wei Fenghe,” a Pentagon spokesman said on Tuesday reported Reuters.

On the other hand, mixed comments from the US Federal Reserve (Fed) officials and unimpressive data challenge US Dollar bulls. That said, Minneapolis Federal Reserve (Fed) President Neel Kashkari told CNN, "We may have to hold rates at a higher level for longer," while adding that he is not forecasting a recession. Following that, Federal Reserve Chairman Jerome Powell said, “Expect 2023 to be a year of significant declines in inflation,” while also adding that if data were to continue to come in stronger than expected, would certainly raise rates more. With this, the US Dollar Index (DXY) remains sluggish near 103.30, after reversing from a one-month high the previous day.

Looking forward, global markets are likely to remain sluggish amid a lack of major data/events, following the current SOTU. However, the US Dollar’s retreat appears unconvincing after the latest strong jobs and activity report, which in turn could allow Fed policymakers to remain hawkish and challenge the risk appetite.