Market News
A correction in US index futures continues to build
Concerns over higher bond yields and risks of contagion from China’s property sector are fueling a significant correction in US index futures. Both NASDAQ and S&P 500 futures have broken key uptrend levels, signaling a shift in sentiment as technical indicators turn increasingly bearish.
Macro Matters – Weekly Review: A Correction in US Index Futures Continues to Build
Concerns over higher yields and Asian contagion
In recent weeks, US index futures have shifted from steady buying during unwinds to a deeper, sentiment-driven correction. Two main factors are driving this change:
1. Rising US bond yields, particularly the 10-year Treasury yield nearing 15-year highs at 4.30%.
2. Contagion risks from China’s faltering property sector, with potential defaults in shadow banking and weakening investor confidence.
The economic slowdown in China, compounded by concerns over shadow banking and property defaults, has not been eased by the People’s Bank of China’s recent rate cut. Chinese equities continue to fall, while the yuan’s weakening has strengthened the USD, underscoring a risk-averse environment.
Higher yields are negative for US index futures
The sharp rise in real US bond yields (-0.85 correlation with the e-mini S&P 500 futures) is pressuring equities, with high-growth sectors like NASDAQ bearing the brunt of the sell-off. Recent outperformance by NASDAQ is now reversing, while the more defensive Dow Jones futures are showing relative resilience.
The technicals turn corrective
Both S&P 500 and NASDAQ futures exhibit increasingly bearish technical patterns:
• S&P 500 futures: The break of a five-month uptrend, along with the daily RSI falling below 40, signals a deeper correction. A confirmed breach below 4368 opens a path toward 4171/4227. Initial resistance stands at 4517.
• NASDAQ 100 futures: Similar trends are evident, with a new downtrend forming. The breach of the June low at 14853 would confirm a bearish phase, targeting 14256 as the next support. Resistance lies at 15335.
This week’s technical shifts reflect growing unease as higher yields weigh on sentiment, and the contagion risks from Asia deepen uncertainties for global markets.
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