S&P 500 Futures track Wall Street’s gains despite sluggish Treasury bond yields

• Markets sentiment remains cautiously optimistic as traders brace for a quiet end to volatile February.
• Hopes of upbeat earnings, mixed US data allowed Wall Street benchmarks to close with mild gains.
• Yields remain lackluster after reversing from multi-day high amid month-end inaction.
• Headlines surrounding China, Brexit and central bankers allow traders to pare the monthly losses.

Global traders appear less interested to mark big moves as the volatile February comes to an end. Even so, mixed US data and risk-positive headlines allow bears to take a breather during Tuesday’s sluggish Asian session.

While portraying the mood, the S&P 500 Futures print mild gains around 3,995, extending the week-start rebound from the monthly low, whereas the US two-year Treasury yields remain sidelined near 4.79% after reversing from a three-month high on Monday. That said, the US 10-year Treasury bond coupons seek clear directions near 3.92% following a downbeat start of the week.

Earlier on Tuesday, market sentiment improves on headlines suggesting the fact that the US offers an olive branch to Chinese companies despite its political differences with the dragon nation and hence allows the S&P 500 Futures to track Wall Street’s gains by the press time. “Despite fraying relations with Beijing, US President Joe Biden is expected to forego expansive new restrictions on American investment in China, denying a push by some hawks in his administration and Congress,” reported Politico late Monday.

Also underpinning the cautious optimism are the hopes of an upbeat US earnings season considering the upbeat employment and inflation figures. It’s worth noting that Monday’s mixed US data exerted downside pressure on the US Treasury bond yields and allowed the equity traders to remain optimistic.

Talking about the data, US Durable Goods Orders slumped -4.5% in January versus -4.0% expected and 5.1% prior. However, the Nondefense Capital Goods Orders ex Aircraft grew 0.8% versus 0.0% analysts’ expectations and -0.3% previous readings. On the same line, the US Pending Home Sales rallied 8.0% MoM versus 1.0% expected and 1.1% prior.

Elsewhere, talks of upbeat China inflation, backed by Securities Daily, as well as UK PM Rishi Sunak’s capacity to deliver a Brexit deal after months of inaction on the front, also seem to favor the market’s risk appetite.

Meanwhile, Federal Reserve Governor Philip Jefferson said on Monday that it is important to get back to 2% inflation to allow those sorts of sustained economic gains. Reuters also portrayed hawkish Fed concerns while saying, “Economic data this month reflected still tight jobs markets and inflation remaining sticky, leading Fed funds futures traders to bet on higher rates, which in the US are now seen peaking in September at 5.4%, up from 4.58% now.” Hence, the hawkish Fed concerns probe the risk-takers. On the same line could be the Sino-American tension surrounding Taiwan and Russia.

Looking forward, the second-tier US data, namely Conference Board’s Consumer Confidence, Chicago Purchasing Managers’ Index and Richmond Fed Manufacturing Index for February, as well as the preliminary US trade numbers for January, will be important for intraday directions. However, major attention will be given to the risk catalysts.

Also read: Forex Today: Sentiment fragile ahead of clearer clues