S&P 500 Futures Are Bid After Core PCE Cooled
December E-mini S&P 500 Index futures are firmer ahead of the New York opening Wednesday. The reason is sitting in the August PCE report. Core came in cooler than expected, with yields backing off Tuesday’s highs. That was enough to pull buyers back in after Tuesday’s weakness, putting the futures back over the 50-day moving average.
It doesn’t answer the bigger question for stocks. ADP came in stronger than expected this morning. Friday’s jobs report is still out there, with the 10-Year sitting near a 2007 high.
At 12:48 GMT, December E-mini S&P 500 Index futures are trading at 7,757.75, up 25.75 points or +0.33%. The contract traded from 7,719.50 to 7,771.25.
Core PCE Took the Heat Off the October Hike
Core PCE came in under the forecast. The futures didn’t wait around. Core rose 3.0% from a year earlier, down from 3.3% in July. Headline slowed to 3.4% from July’s 3.7%, which is also where economists had it pegged.
Both are still well above the Fed’s 2% target. Nobody at the Fed is calling this a win. What changed is the direction. For the past week the rate market was pricing higher oil, tariffs and the Middle East conflict as reasons to tighten more. This report pushes back on that.
The 10-Year U.S. Treasury yield slipped to about 5.22% after getting close to 5.30% Tuesday. The 30-Year came down too, off its highest level since 2002. That’s the relief trade under the futures this morning.
The October hike odds got cut hard. Traders have about a 49% chance of a quarter-point increase priced now, down from 71% on Monday. New York Fed President John Williams laid the groundwork Tuesday, saying policymakers have time to gather more information before the October meeting. PCE finished the job.
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See all Dow Jones forecastsADP Came in Firm Enough to Keep October Alive
Stocks didn’t get an all-clear this morning. ADP had private employers adding 90,000 jobs in September against a 68,000 estimate. August got revised down to a 36,000 gain, so September more than doubled it.
That’s not a labor market handing the Fed a reason to stand down. Core cooled while hiring picked up. Friday’s Non-Farm Payrolls report is where that fight gets settled, with October odds sitting right around even going in.
The futures rally is a reaction to one inflation report. I wouldn’t treat it as proof the rate trade is finished. The 10-Year is off its high, however, it’s still well above its 5.04% breakout level and the 50-day moving average. Bond traders are still carrying plenty of inflation and supply risk in the long end.
Month-end is adding its own noise. Third-quarter and September-end positioning may whip the tape around intraday. The S&P 500 Index and the Dow Jones Industrial Average are tracking for monthly losses, while the Nasdaq is still up for September. Buyers have an inflation number to work with. They haven’t shown yet that they’ll carry it into Friday.
Daily December E-mini S&P 500 Index Futures Technical Analysis
December E-mini S&P 500 Index futures are edging higher early Wednesday after recapturing the 50-day moving average at 7,730.84, following earlier weakness.
The main trend is up according to the daily swing chart. A trade through 7,848.50 reaffirms the uptrend. The main trend will change to down if 7,575.00 is taken out.
The minor trend is down. A trade through 7,814.75 will change the minor trend to up and shift momentum higher.
The nearest support zone is 7,711.75 to 7,679.50. The closest resistance zone is 7,778.00 to 7,794.50.
A sustained move over the 50-day moving average will put 7,778.00 to 7,794.50 into play. Overcoming its upper level would indicate the buyers are getting stronger with 7,814.75 and 7,848.50 potential targets.
A failure to sustain a move over the 50-day moving average will signal the presence of sellers. This could lead to a quick test of 7,711.75 to 7,679.50. If the latter fails, the index could extend losses into a longer-term retracement zone at 7,632.00 to 7,584.00.
What to Watch
The cash open gets its first crack at the softer PCE report with Treasury yields already off Tuesday’s high. Stocks are taking their cue from the long end this morning. Friday’s jobs number is still sitting out there, with ADP giving the hawks something to hold onto.
The main trend is up on the daily swing chart, with the minor trend still down. Futures took back the 50-day moving average before the New York opening. They pushed to within a few points of 7,778.00 by 12:48 GMT before backing off. It looks as if trader reaction to the 50-day moving average at 7,730.84 will be setting the tone today.
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