S&P 500: Futures lose steam at week start, yields fall on inflation concerns and a light calendar

• Market sentiment remains cautiously optimistic despite the lack of action.
• S&P 500 Futures are looking for new clues to extend Monday’s rebound from a one-week low.
• US Treasury yields consolidate last week’s recovery amid downbeat inflation expectations and employment data.
• The Fed’s hawkish comments and jitters over the US-China relationship are additional filters probing momentum traders for new clues.

The risk profile looks unclear in the early hours of Tuesday, despite likely cautious optimism, as market traders battle for fresh momentum amid a light calendar and a lack of major macro news. Still, Monday’s downbeat clues on US and Chinese inflation join last week’s mixed employment data to support riskier assets.

Against this backdrop, S&P 500 futures are hovering around 4,445 points, up 0.05% intraday, as they struggle to extend the previous day’s rally from the lowest level since June 29. That being said, US Treasury yields remain under pressure after Monday’s reversal from the highest level since March. It should be noted that the 10-year US Treasury yield posted its first daily loss in July the previous day, while the 2-year yield fell for the second day in a row, to stand respectively near 4.00% and 4.86%.

In addition, Asia-Pacific stocks rose, while the Dollar Index fell to its lowest level in two months, around 101.85, for the fourth day in a row. Still, Gold and Crude Oil prices remain uncertain, near $1.925 and $73.20 respectively.

On Monday, downbeat hints about US inflation, according to the New York Federal Reserve’s (Fed) monthly survey of inflation expectations, followed Friday’s disappointment in headline US jobs numbers. ., choking the US dollar. It should be noted that the latest US jobs report for June marked a negative surprise and dealt a heavy blow to the dollar, posting the biggest daily loss in three weeks on Friday. However, markets are still expecting a 0.25% rate hike in July and therefore risk appetite seems elusive.

Elsewhere, weaker Chinese inflation data on Monday raised fears of deflation in the world’s largest industrial player. Elsewhere, tension between the US and China is also rising and is pushing market sentiment, but news of additional stimulus from China to the real estate front in the country seems to push the bears back.