S&P 500 Futures track sluggish US Treasury yields amid pre-Fed trading lull

S&P 500 Futures remain indecisive after a pullback from record top.
US Treasury yields stay pressured for second consecutive day.
Cautious sentiment ahead of FOMC keeps traders at bay as US data backs reflation fears.

S&P 500 Futures wobble inside a 4,235-40 range following a U-turn from the all-time high. That said, the risk barometer follows US Treasury yields to portray sluggish markets ahead of the key US Federal Open Market Committee (FOMC) meeting.

US 10-year Treasury yield seesaws around 1.49% after snapping a two-day uptrend on Tuesday.

US inflation expectations could be cited as the key cause of the market’s anxiety as early signals from the New York Fed and St. Louis Fed stay firmer following the US data, which in turn probes the Fed policymakers’ rejection of reflation fears.

A mixed play of May’s US Retail Sales and Producer Price Index (PPI) could be traced as the latest catalyst backing the reflation fears. While Retail Sales dropped -1.3% versus -0.8% expected the PPI rose more than 6.3% forecast to 6.6% YoY.

Other than the US data and pre-Fed caution, escalating tension between the Western friends and China joins fears of the Delta variant of the covid to probe the bulls. Furthermore, oil’s rally to over two-year highs and chip shortage are some of the extra burdens on the market sentiment.

It’s worth noting that Wall Street benchmarks turned red following the downbeat US Treasury yields and weaker Retail Sales print the previous day.

Read: Wall Street Close: FOMC fears, sluggish data keep bears hopeful

Moving on, inflation numbers from the UK and Canada will join China’s Retail Sales and Industrial Production to entertain investors. Though, nothing will be more important than the Fed’s quarterly economic outlook, dot-plot and Chairman Jerome Powell’s speech. While bulls will search for the extension of the easy money and no mentions of tapering, sellers seem bracing for a surprise.

Read: Federal Reserve Preview: First up, then down? Playbook for trading the Fed

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