S&P 500 Futures dribble at six-week high, yields dwindle amid mixed concerns about inflation, Fed

Traders remain unclear during early Tuesday as a light calendar joins mixed catalysts, after a cautiously optimistic start to the key NFP week.

That said, the mixed concerns over inflation and the Federal Reserve’s (Fed) next moves joined downbeat US data to trouble the market players of late.

While portraying the mood, the S&P 500 Futures seesaw around 4,151, after rising in the last four consecutive days to refresh a six-week high. On the other hand, the US 10-year and two-year Treasury bond yields also remain inactive around 3.42% and 3.98% after the longer-term bond coupons dropped in the last four consecutive days to 3.42% while the shorter one marked a two-day downtrend in the last to 3.97%.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known as OPEC+, announced a surprise output cut on Monday and renewed inflation fears. However, US President Joe Biden shrugged off the OPEC+ move and said that it is not as bad as you think, which in turn might have allowed the Gold price to remain firmer despite the inflation woes.

On the other hand, US Federal Reserve Board Governor Lisa Cook, as well as US Treasury Secretary Janet Yellen flagged fears of higher inflation and challenges to global growth.

However, softer US data and yields allowed traders to remain optimistic, especially amid the receding hawkish Fed bets. On Monday, the US ISM Manufacturing PMI dropped to the lowest levels since May 2020 in March, to 46.3 versus 47.5 expected and 47.7 prior. On the same line, the final readings of March’s S&P Global Manufacturing PMI eased to 49.2 compared to 49.3 initial estimations. The weaker PMI data traced the last week’s softer prints of the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, to weigh on the market’s Fed bets. As a result, the CME’s FedWatch Tool marks nearly 45% market bets on the Fed’s 0.25% rate hike in May, versus 52% expected on Friday.

Elsewhere, Russian Foreign Minister Sergei Lavrov raised fears of escalating Moscow-Brussels tussle by saying, “The European Union (EU) has "lost" Russia.” The policymaker also added that Moscow will deal with Europe in a tough fashion if need be. Furthermore, the US-China tension is also on the table as Beijing keeps reiterating its dislike for the US-Taiwan ties but Washington seems to ignore it.

Looking ahead, US Factory Orders for February may entertain intraday traders amid a light calendar elsewhere. However, risk catalysts and cautious mood ahead of this week’s key US jobs report can check the optimists.

Also read: Forex Today: Markets remain upbeat despite OPEC+ surprise output cut; RBA next