S&P 500 futures chart market consolidation ahead of Fed, Japanese holiday chain returns

  • S&P 500 futures extend their rebound from yearly lows, US Treasury yields remain near multi-year highs.
  • In Japan, China adds strength to the pre-Fed trade lull.
  • The Fed’s preference for orderly markets, geopolitical and covid-related challenges are testing hawks amid mostly embedded results.
  • US ISM Services PMI, ADP Employment developments will also be important to watch.

Global markets remain nervous, but slightly positive, as traders remain cautious ahead of the outcome of the key Federal Open Market Committee (FOMC) meeting, which will be released on Wednesday evening. In addition to pre-Fed anxiety, the holidays in China and Japan are also limiting market moves.

Even so, the S&P 500 Futures is posting slight gains while heading towards 4,200, up for the third day in a row. However, 10-year US Treasury yields remain idle at around 3.0% as a drop in Tokyo limits bond moves in Asia.

The latest optimism could be supported by a decline in US bond yields from the highest levels since December 2018. More importantly, expectations that the US Federal Reserve (Fed) will match the widely anticipated and priced 50 basis points ( bps ) of a rate hike and provide hints of balance sheet normalization that also support the latest consolidation.

While considering the same, the Australian and New Zealand (ANZ) Banking Group said: “Given the weight the FOMC places on forward guidance and a preference for orderly market movements, particularly given the current geopolitics and the slowdown in China, such a surprise seems unlikely. .”

It should be noted that the US Dollar bears the brunt of market indecision as it remains grounded around its 20-year high, recently widened near 103.50. This ignores strong JOLTS job openings and factory orders for March data released the day before. Additionally, escalating geopolitical fears and covid woes would also have supported US dollar strength, but failed to do so.

Going forward, the Fed’s battle to tame inflation will be crucial to watch, but the monthly printout of the US ISM Services PMI and ADP employment developments will also be important for clear guidance. . Moreover, updates from Russia and China are also likely to help with trade decisions.

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