S&P500 Futures, yields stabilize ahead of US Durable Goods Orders, banking woes, US debt ceiling talks eyed

• Market slips into consolidation phase after heavy risk aversion.
• S&P500 Futures pare the biggest daily loss in a month, yields prod two-day downtrend.
• First Republican Bank renews fears of banking fallouts, US Treasury Secretary Yellen flags fears of “catastrophic” default.
• US data, risk catalysts are the key as sour sentiment underpins US Dollar, Gold and Yen demand.

Risk appetite improves early Wednesday, following a pessimistic day in the financial markets, mainly led by the banking fears as US default woes.

While portraying the mood, the S&P 500 Futures print mild gains around 4,115 as it pares the biggest daily loss in a month. However, the US 10-year Treasury bond yields prod a two-day downtrend while the US two-year bond coupons remain pressured. That said, the US Dollar Index (DXY) remains indecision around 101.85 after snapping a three-day downtrend while the prices of Gold and WTI crude oil remain slightly positive.

That said, the latest fears emanating from the First Republic Bank (FRB) and the US debt ceiling discussion appear the major driver of the market even as the traders lick their wounds ahead of the key US Durable Goods Orders for March of late.

The FRB renewed the woes of banking fallouts by flashing disappointing earnings reports and the executives’ resistance in taking questions, not to forget mentioning the absence of earnings guidance. However, the major central banks tried to restore market confidence by curtailing the US Dollar operations initiated during the first wave of the banking crisis. “The world's top central banks are cutting the frequency of their dollar liquidity operations with the U.S. Federal Reserve from May, sending the clearest signal yet that last month's financial market volatility is essentially over,” said Reuters.

Elsewhere, the US policymakers’ inability to agree on the key debt ceiling as the expiration looms in June also roils the market sentiment. On Tuesday, US Treasury Secretary Janet Yellen warned that failure by Congress to raise the government's debt ceiling–and the resulting default–would trigger an "economic catastrophe" that would send interest rates higher for years to come, per Reuters.

On a different page, the US statistics have been mixed and contribute to the uncertainty surrounding the Federal Reserve’s (Fed) future moves, which in turn strengthen the market’s downbeat bias, despite the latest cautious optimism. That said, US Conference Board's Consumer Confidence Index edged lower to 101.3 for April, versus 104.0 prior. Additional details of the publication stated that the Present Situation Index ticked up to 151.1 during the said month from 148.9 prior whereas the Consumer Expectations Index dropped to 68.1 from 74 previous readings. Further, the one-year consumer inflation expectations eased to 6.2% in April from 6.3% in March. In a different release, the US New Home Sales rose to 0.683M MoM in March versus 0.634 expected and 0.623M revised prior while the S&P/Case-Shiller Home Price Indices and Housing Price Index both rose past market forecast to 0.4% and 0.5% respectively for February.

Moving on, the US Durable Goods Orders for March, expected to improve to 0.8% versus -1.0% prior, will be important for market forecasts.

Also read: Forex Today: Risk aversion lifts the Yen and the US Dollar