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Market news

25 January 2023

S&P 500 Futures trace Wall Street’s clues, US Treasury yields stay pressured amid lackluster markets

  • Market sentiment remains mixed as traders brace for next week’s Fed meeting after mixed PMIs.
  • Cautious mood ahead of US Q4 GDP joins blackout periods at Fed, ECB to restrict market moves.
  • S&P 500 Futures extends pullback from six-week high, US Treasury bond yields stay defensive.
  • Light calendar, mixed clues keep traders guessing ahead of US GDP, FOMC.

Risk appetite wanes during Wednesday’s sluggish Asian session as traders try to gauge the recent activity data ahead of the next week's all-important monetary policy meetings, not to forget Thursday’s US Gross Domestic Product (GDP) for the fourth quarter (Q4). It’s worth noting that the mixed earnings and China’s absence from the markets, as well as cautious mood ahead of the European Central Bank (ECB) and the Federal Reserve (Fed) monetary policy meetings, seem to challenge the momentum traders of late.

While portraying the mood, S&P 500 Futures drop half a percent to 4,012, extending the previous day’s U-turn from the 1.5-month high. Further, the US 10-year Treasury bond yields drop 1.5 basis points (bps) to 3.45% while the two-year counterpart posted the biggest daily loss in a week around the 4.15% level.

It’s worth noting that Wall Street closed mixed on Tuesday as a technical glitch joined the mixed earnings report. “Fourth quarter earnings season is in full swing, with 72 of the companies in the S&P 500 having reported. Of those, 65% have beaten consensus, just a hair below the 66% long-term average, according to Refinitiv,” said Reuters.

Among the key equity headlines were the underwhelming forward guidance from 3M and General Electric, as well as the US Justice Department’s lawsuit against Google.

Elsewhere, the US Dollar Index (DXY) remains pressured as the US activity data for January remained below 50.0 level and suggested contraction despite improving a bit. The same help the prices of Gold and Oil to remain firmer.

It should be observed that the early-day release of quarterly inflation data from New Zealand and Australia entertained traders with the AUD/USD leading the G10 bulls around 0.7090 by the press time.

Looking forward, the first readings of the US fourth-quarter (Q4) Gross Domestic Product (GDP), up for publishing on Thursday, will be crucial to watch for immediate directions. The reason appears logical due to the next week’s Federal Open Market Committee (FOMC) meeting, as well as the talks of the US recession. Forecasts suggest the world’s biggest economy eases with 2.8% annualized growth.

Also read: US Gross Domestic Product Preview: Three reasons to expect a US Dollar-boosting outcome

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