S&P500 Futures, yields depict cautious mood as US inflation cements hawkish Fed halt expectations

• Market sentiment dwindles as traders brace for the FOMC.
• Traders appear almost certain of witnessing end to Fed’s 10 consecutive rate-hike cycle.
• S&P500 Futures grind at the highest levels since 2022 despite upbeat Wall Street closing.
• US 10-year, two-year Treasury bond yields retreat from multi-day highs.

Market players position themselves for the all-important Federal Reserve Interest Rate Decision early Wednesday.

While portraying the mood, the S&P500 Futures struggle at the highest levels since April 2022, marked the previous day, as it prods a four-day uptrend near 4,370 by the press time. Additionally, the US 10-year Treasury bond yields retreat from the 13-day high of 3.83% to 3.81% whereas the two-year counterpart poked the highest levels in three months with the 4.70% mark before easing to 4.65% at the latest.

Also portraying the market’s indecision is the dicey moves of the US Dollar Index (DXY), after falling to the three-day low the previous day, as well as the sluggish performance of the Gold and Oil prices.

That said, the tech-heavy Nasdaq led the gainers on Wall Street as shares of Apple, Nvidia and Tesla rallied after the US inflation numbers bolstered the IT shares, as well as the overall market sentiment.

It should be noted that the US Consumer Price Index (CPI) drops more-than-expected and prior releases to 0.1% MoM and 4.0% YoY. However, the Core CPI, known as the CPI ex Food & Energy, matches 0.4% monthly and 5.3% yearly forecasts. It’s worth noting that the US headline CPI dropped to the lowest since March 2021 and hence justifies the market’s expectations of witnessing no rate hike from the US Federal Reserve (Fed).

The same could be observed through the CME’s FedWatch Tool as it suggests more than a 90% chance of the US Federal Reserve’s (Fed) no rate hike during today’s monetary policy meeting, versus around 75% chance before that.

Elsewhere, China’s push for more liquidity generation and the Sino-American tension joins the bond market activity due to the US debt-ceiling deal to entertain the traders.

Looking ahead, second-tier data from the UK, Eurozone and the US may offer some moves to the market players ahead of the key Federal Open Market Committee (FOMC) monetary policy meeting.

Also read: Forex Today:  After US CPI, attention turns to the FOMC