S&P 500 Futures struggle after the biggest daily jump of month, yields dribble ahead of US data, key earnings

• Markets remain dicey after a volatile day that drowned US Dollar and fuelled risk-on mood.
• Greenback drops as US inflation clues, employment data keep pushing back hawkish Fed bets.
• Recession woes, geopolitical concerns fail to provide tailwind to USD.
• S&P 500 Futures remain lackluster, US Treasury bond yields retreat ahead of US consumer-centric statistics.

Market players portray a mixed feelings during early Friday, following a volatile Thursday, amid anxiety ahead of the key US data. Also contributing to the trading inaction could be the lack of major data/events during the Asian session, as well as the lack of clarity over the economic optimism in Asia.

While portraying the mood, the S&P 500 Futures make rounds to 4,170-75 after rising the most in the current month whereas the US 10-year and two-year Treasury bond yields fade the previous day’s corrective bounce by retreating to 3.44% and 3.96% in that order. It should be noted that Wall Street closed with notable gains the previous day whereas the US Dollar Index (DXY) prods the lowest level of 2023 marked in February as the greenback bears attack the 100.80 level, around 100.90 by the press time.

The downbeat US inflation clues and the Fed policymakers’ hesitance in confirming the further rate hikes exert downside pressure on the yields and the US Dollar, while favoring the equities. Also weighing on the yields could be the fears of a recession in the West and geopolitical fears emanating from China, Russia and North Korea.

That said, the US Producer Price Index (PPI) for March dropped to a four-month low of -0.5% MoM versus 0.0% expected and prior whereas the PPI YoY also declined to 2.7% from 4.9% previous readouts, versus market forecasts of 3.0%. Previously, the Consumer Price Index (CPI), dropped to the lowest level since May 2021, to 5.0% YoY in March from 6.0% prior and versus 5.2% market forecasts. However, the annual Core CPI, namely the CPI ex Food & Energy, improved to 5.6% YoY during the said month while matching forecasts and surpassing 5.5% prior.

Additionally, Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting also direct traders toward the US Treasury bond yields and weigh on the US Dollar, as well as favor Wall Street. The reason could be linked to the Minutes stated saying that the expectations for rate hikes were scaled back due to the turmoil in the banking sector. With this, the Minutes offered no fresh information and raised doubts about the hawkish Fed moves, apart from May’s 0.25% rate hike.

Elsewhere, multiple statements from the International Monetary Fund (IMF) and the World Bank (WB) Spring Meeting of global central bank officials suggest that the recession woes are more likely in the West while suggesting an economic recovery in Asia. The same underpins the cautious optimism.

Moving on, the US Retail Sales for March, the Michigan Consumer Sentiment Index (CSI) for April and the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations will be important to watch for clear directions. Also important will be the first quarter (Q1) earnings reports from key banks like JP Mogan, Wells Fargo and Citibank.

Also read: Forex Today: Dollar consolidates after heavy losses, remains vulnerable