S&P 500 Futures trace pullback in yields as mixed news precede US ISM Services PMI

• Market sentiment remains sour even as US Treasury bond yields retreat from multi-day top.
• S&P 500 Futures fade bounce off six-week low, stays pressured of late.
• Talks of Fed’s pivot, strong China data and likely resumption of Sino-American trade negotiations are the latest positives to cheer.
• Cautious mood ahead of key US data, Sino-American tussle at G20 probe optimists.

The risk profile remains dicey during early Friday, portraying a cautious mood ahead of the key US ISM Services PMI amid mixed macros and unimpressive data.

While portraying the mood, S&P 500 Futures print 0.25% intraday loss to around 2,975, fading the previous day’s bounce off the lowest levels marked during late January. Further, the 10-year coupons drop two basis points to 4.05% whereas its two-year counterpart seesaws around 4.89% by the press time. Further, S&P 500 Futures struggle for clear directions after mild losses. It’s worth noting that the US 10-year Treasury bond yields rose to a fresh high since early November 2022 while piercing the 4.0% threshold whereas the two-year counterpart rallied to the highest levels since 2007 to 4.94% on Thursday.

Although the cautious mood ahead of the key US activity data seems to weigh on the market sentiment, fresh chatters of the Federal Reserve (Fed) policy pivot and impressive China data appear as the risk-positive catalysts. Also troubling the traders are the mixed bias about the Sino-American ties in the future.

That said, Thursday’s statements from Federal Reserve Bank of Atlanta President Raphael Bostic renewed concerns about the Fed’s policy pivot as the decision-maker said, “The central bank could be in position to pause the current tightening cycle by mid to late summer.” It should be observed, however, that Boston Fed President Susan Collins kept supporting the higher rates for longer as she said, “More rate hikes are required to bring inflation back in control.”

On the same line was the latest Reuters poll on the US Dollar as it states, “A weaker greenback in a year amid an improving global economy and expectations the US Federal Reserve will stop hiking interest rates well ahead of the European Central Bank.” The February 28 to March 2 poll of 69 currency specialists also mentioned that the dollar was forecast to trade lower than current levels against all major currencies in the next 12 months.

Talking about the data, China’s Caixin Services PMI traced the latest activity data for the dragon nation while printing 55.00 figures for February, versus 50.0 market forecasts and 52.9 previous readings. Alternatively, the US Jobless Claims dropped to 190K during the week ended on February 24 versus 195K market forecasts and 192K prior. Further, Nonfarm Productivity for the fourth quarter (Q4) eased to 1.7% from 3.0% prior and 2.6% market forecasts while the Unit Labor Costs jumped 3.6% versus 1.6% analysts’ estimations and 1.1% previous readings.

Elsewhere, the US-China tension at the Group of 20 Nations (G20) meeting, amid the former’s push for sanctions on countries having strong ties with Russia and aiding Moscow in the war with Ukraine, previously probed the risk-off mood. However, chatters of the likely resumption of the Sino-American trade talks seemed to have triggered the market’s optimism afterward.

Moving forward, the market is likely to remain cautiously optimistic amid fresh Federal Reserve policy pivot talks. However, the US ISM Services PMI for February, expected at 54.5 versus 55.2 prior readings, will be crucial to watch for intraday directions. Above all, the next week’s Federal Reserve (Fed) Chairman Jerome Powell’s Testimony and the monthly US jobs report for February, encompassing the key Nonfarm Payrolls (NFP) will be the key for clear guide.

Also read: Forex Today: Dollar, yields and stocks rise after US labor market numbers