S&P 500 Futures snap two-day winning streak as US Treasury bond yields portray market fears

• Risk appetite wanes amid US debt ceiling drama, geopolitical woes.
• S&P 500 Futures print mild losses after two-day uptrend as week-start optimism fades.
• Difference between US one-month and three month Treasury bond yields widens the most since 2001.
• US CB Consumer Confidence eyed for intraday directions, risk catalysts are the key.

Market sentiment remains fragile amid anxiety ahead of the US debt ceiling expiration, as well as the key US data and events. Adding strength to the downbeat mood are the market’s preparations for the Federal Reserve’s (Fed) dovish hike in the next week, as well as fears that geopolitical concerns and higher rates could tame global economic growth.

Amid these plays, S&P 500 Futures print mild losses near 4,155 as it snaps a two-day uptrend after mixed closing of the Wall Street benchmarks. On the other hand, the US Treasury bond yields highlight the rush for risk safety as the benchmark 10-year bond coupons drop to 3.48% at the latest. More importantly, the difference between the one-month and the three-month US Treasury bond yields widen the most since 2001 as the coupons flash 3.48% and 4.98% mark of late.

Fears of US debt ceiling expiration, looming in June, escalate as the US policymakers keep jostling over the details. On Monday, US House Speaker Kevin McCarthy signaled no intention of altering the debt ceiling, which in turn flags a tough road for the key decision as multiple proposals from the Democrats need such a move.

“Kevin McCarthy and his vote-counting lieutenants are telling fellow Republicans they will not change their $1.5 trillion debt-ceiling proposal, despite rank-and-file GOP demands for alterations,” said Bloomberg on Monday.

Elsewhere, markets also prepare for the US Federal Reserve’s (Fed) one last rate hike, worth 0.25%, in May before signaling the policy pivot, which in turn weigh on the yields as higher rates propel recession woes.

It should be noted that the geopolitical fears surrounding Russia and China join the market’s cautious mood ahead of this week’s top-tier growth and inflation data to prod the sentiment. China’s alleged support to Moscow in fighting with Ukraine joins the Western readiness to increase sanctions on the Oil-rich nation to weigh on sentiment.

Alternatively, hopes of gradual economic recovery and an upbeat earnings season allow the optimists to battle the market’s negativity. On Tuesday, a slew of top-tier companies like General Electric, Microsoft, Alphabet and UPS are up for publishing their first quarter (Q1) results.

Looking ahead, US Conference Board’s (CB) Consumer Confidence gauge for April, expected to remain steady near 104.1 versus 104.2 prior, will be important for the intraday directions of the market. However, major attention will be given to US Q1 GDP, US Core PCE Price Index and the yields for a clear guide.

Also read: Forex Today: US Dollar loses momentum as Treasury yields slide