S&P 500 Futures stay pressured amid recession, Fed concerns on Juneteenth holiday

• Market sentiment remains pessimistic as growth fears join hawkish Fed bets.
• S&P 500 Futures remain depressed around yearly low, yields stay unchanged on Juneteenth holiday.
• Fed’s Powell in focus, updates over China’s covid, Sino-America ties are also important for fresh impulse.

Risk appetite remains sour as fears of economic slowdown join hopes of higher Fed rates during a sluggish Asian session on Monday. However, a light calendar and Juneteenth holiday in the US stock and bond markets limits the activity.

That said, the S&P 500 Futures drop 0.20% intraday to 3,672, reversing Friday’s corrective pullback from the yearly low. It’s worth noting that the US 10-year Treasury yields remain static near 3.23% amid holidays in the US.

The Washington Post (WaPo) raised fears of a tough new economic climate due to the US Federal Reserve (Fed) rate hike of the 75 basis points (bps). The news mentioned that the Fed’s rate hike launched a high-stakes test of the economy's ability to shed its dependence on limitless credit and tolerate higher borrowing costs for consumers, businesses and the government. On the same line were concerns about China’s 3.0% growth in the second quarter (Q2) of 2022.

Further, fears of recession, as well as hawkish Fed bets, were the key catalysts weighing on the market sentiment. Among them were US central bank policymakers namely Minneapolis Fed President Niel Kashkari who backed another 75 bps rate hike in July. Additionally, Treasury Secretary Janet Yellen also mentioned her expectations of a slowdown in the economy but ruled out recession concerns.

Alternatively, the People's Bank of China (PBOC) kept its key monetary policy rates, namely the 5-year and 1-year Loan Prime Rate (LPRs) unchanged at 4.45% and 3.70% respectively during Monday's announcement. The Chinese central bank’s inaction contrasts with the Western policymakers' hawkish bias but fails to renew the market’s optimism.

Also on the positive side is a piece of news from Reuters saying, “President Joe Biden's administration is reviewing the removal of some tariffs on China,” as well as upbeat covid news from Beijing and Shanghai to favor the market’s cautious optimism.

It should be noted that the cautious sentiment ahead of Fed Chairman Jerome Powell’s Testimony may join the US holiday to restrict intraday moves.