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S&P 500 futures steady as bond market sell-off abates

by Clarence Jones

Title: U.S. Stock Futures Show Signs of Stability Amid Fluctuating Treasury Yields

Date: Oct. 5, 2023

The U.S. stock futures market saw a relatively calm start on Thursday, with Treasury yields fluctuating mildly and indicating signs of stabilization after a recent bond sell-off. This development has brought some relief to investors following a period of volatility.

On Wednesday, major stock indexes made notable gains. The Dow Jones Industrial Average (DJIA) rose by 127 points, or 0.39%, reaching 33,130. The S&P 500 (SPX) increased by 34 points, or 0.81%, reaching 4,264, while the Nasdaq Composite (COMP) gained 177 points, or 1.35%, ending the day at 13,236.

In terms of stock-index futures, here is a breakdown of their performance:

– S&P 500 futures (ES00): dipped 4 points, or 0.1%, to 4,294
– Dow Jones Industrial Average futures (YM00): fell 45 points, or 0.1%, to 33,281
– Nasdaq 100 futures (NQ00): eased 16 points, or 0.1%, to 14,908

The primary driving force behind these market movements remains the U.S. Treasury market, as traders continue to analyze economic data in order to gauge the Federal Reserve’s policy trajectory.

While ten-year Treasury yields remained relatively stable on Thursday, the previous two sessions saw significant fluctuations. On Tuesday, the S&P 500 fell by 1.4% as the 10-year Treasury yield reached a 16-year high of around 4.8% when the JOLTS survey revealed a robust labor market. However, Wednesday saw the stock market rebound by 0.8% after a softer-than-expected ADP employment report helped push 10-year yields down to around 4.73%.

Investors now eagerly await Friday’s jobs data, which will play a crucial role in shaping the direction of the market. Positive jobs data may alleviate concerns, while strong data could fuel expectations of a more hawkish Federal Reserve and further boost U.S. yields.

Before this key release, traders will focus on several economic updates scheduled for Thursday, including the weekly initial jobless claims data and the trade deficit report for August, both slated for release at 8:30 a.m. Eastern time. Additionally, Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly are anticipated to make comments at separate events.

Following recent choppy trading, which saw the CBOE VIX index, a measure of expected volatility, reach its highest level in four months, technical analysts suggest that the S&P 500 may rally in the short term. Mark Newton, a technical analyst at Fundstrat, indicates that equity markets might find support soon, potentially coinciding with weaker economic data or indications of the Federal Reserve pausing rate hikes.

Ultimately, as investors navigate these uncertain times, they will closely monitor the interplay between stock market trends, Treasury yields, and upcoming economic data, all of which are critical factors in shaping market sentiment and determining the trajectory of U.S. stock futures.

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