S&P500 Futures, yields print mild losses as US default fears amplify, inflation, banking news eyed

• Market sentiment fades previous optimism as US debt ceiling woes escalate ahead of key data/events.
• S&P 500 Futures pare Friday’s heavy gains around mid-4,100s, US Treasury bond yields remain depressed.
• Monday’s light calendar prods momentum traders but US CPI, BoE and banking survey report will be crucial for fresh impulse.

Risk profile remains unimpressive during early Monday as traders lack fresh clues to extend the previous optimism. Adding strain to the market sentiment are the headlines suggesting elevated fears of the US default and banking sector fallouts. However, the Fed’s dovish hike and concerns that policymakers will be able to tackle the challenges join the upbeat news from Apple to keep traders hopeful as the key week comprising US inflation begins.

While portraying the mood, the S&P 500 Futures print mild losses near 4,147 after posting a stellar run-up on Friday. That said, Wall Street benchmarks cheered the downward revision of the US Nonfarm Payrolls (NFP) and Apple’s upbeat results to mark the upbeat closing of the volatile week.

On the other hand, the US 10-year Treasury bond yields drop 1.5 basis points (bps) to 3.43%, pressured for the third consecutive week, whereas the two-year counterpart follows suit near 3.92% by the press time.

The higher prints of the US Nonfarm Payrolls (NFP) failed to divert the market’s attention from downwardly revised prior readings and joined the Federal Reserve’s (Fed) indirect signals for policy pivot to favor the optimists. That said, the US Bureau of Labor Statistics (BLS) unveiled a jump in the headline Nonfarm Payrolls (NFP) by 253K expected and revised down prior readings of 165K. Further, the Unemployment Rate also eased to 3.4% versus 3.5% market forecasts and the previous mark whereas Average Hourly Earnings improved to 4.4% YoY from 4.3% prior (revised) and analysts’ estimations of 4.2%.

On the other hand, US Treasury Secretary Janet Yellen on Sunday issued a stark warning that a failure by Congress to act on the debt ceiling could trigger a "constitutional crisis" that also would call into question the federal government's creditworthiness, per Reuters.

Elsewhere, US banking woes amplify as traders await US Senior Loan Officer Opinion Survey on Bank Lending Practices.

Furthermore, hawkish comments from St. Louis Federal Reserve President James Bullard, who supported the 25 basis point rate hike that the Fed took last week also weighed on the sentiment during a softer start to the key week.

Looking forward, Monday’s holiday in the UK and France can restrict the market’s immediate moves ahead of the US Consumer Price Index (CPI) for April, up for publishing on Wednesday, as well as the US banking survey results. Also important to watch will be the Bank of England (BoE) Monetary Policy Meeting, UK Gross Domestic Product (GDP) for the first quarter (Q1) of 2023.

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