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US stock futures retreat slightly ahead of Treasury auctions and inflation data

us stock futures

US stock futures are heading down slightly this morning as traders await the release of the results from the auction of 3-year and 10-year US Treasury notes to gauge the market’s appetite for government bonds and its corresponding impact on yields.

After closing the week with a 2.7% gain, E-mini futures of the S&P 500 are down 0.16% at 4,113 while futures of the Nasdaq 100 are retreating 0.3% at 13,790 following a remarkable week as well where the tech-heavy index advanced 3.9%.

Among other important events this week, investors will be eagerly awaiting the release of last month’s inflation data from the United States this Tuesday.

Data from Koyfin indicates that economists forecasting a 0.5% monthly advance in prices and an annualized inflation rate of 2.5%. Meanwhile, annualized core inflation is expected to land at 1.6% or 30 basis points higher than last month’s reading.

Finally, as we advance further into this week’s economic calendar, other major data points including a monthly update on retail sales from the US Department of Commerce and industrial production and capacity utilization readings from the Federal Reserve will mark the tone of the market’s this week with economists expecting to see retail sales advancing 5.5% compared to the previous month as the US economy keeps stepping out of the virus crisis.

“US data is expected to be strong this week and US vaccinations are increasing”, said Evercore ISI analyst Dennis Debusschere in regards to this week’s events and data points.

Meanwhile, on the Treasury securities front, analysts coincide that this week’s auctions will be closely followed by market participants, with the United States planning to float a total of $96 billion in 3-year and 10-year notes today and another $24 billion in 30-year Treasury bonds tomorrow.

“No matter how you slice it, supply auctions will be in focus”, Justin Lederer, a bond analyst for Cantor Fitzgerald told Reuters this morning.

Although any sign of weak demand in these auctions as a result of a strong risk-on attitude from market players could result in another short-term spike in Treasury yields, analysts believe that certain supportive factors will play in favor of a stable outcome.

What’s next for US stock futures?

us stock futures nasdaq 100
E-mini futures Nasdaq 100 (NDX) price chart – 1-day candles view with multiple indicators – Source: TradingView

Given the fair share of stability predicted for both retail sales and CPI readings for the period, chances are that volatility this week for US stock futures could be kept in check. However, the outcome of US Treasury auctions today could mark the tone for the rest of the week in case the demand for government bonds comes out weaker than expected.

On Monday last week, we anticipated that a break above the Nasdaq’s key resistance of 13,300 could trigger a short-term uptrend and that is exactly what happened.

This week, the tone is a bit more cautious as we are approaching the index’s all-time high. The price action around this particular area of resistance at 13,900 will possibly determine if we move higher from here or if the tech-heavy benchmark will continue to post some choppy performance as market participants keep rotating to the virus-battered areas of the market.

In this particular context, a strong retail sales report could play against the performance of the Nasdaq while favoring the advance of the value-focused Dow Jones Industrial Average (DJIA).

Meanwhile, CPI data and the outcome of this week’s Treasury auctions could have a market-wide impact depending on where they land compared to analysts’ estimates. For now, it would be plausible to expect that the Nasdaq will jump above 13,900 at least in intraday stock trading action today or even tomorrow while traders should keep an eye on how the market reacts once that happens.

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Alejandro Arrieche

Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.