Piece written by Alexa Smith, Trive Financial Market Analyst 

The S&P 500 Futures (CME: ES) staged a notable recovery, buoyed by the resurgence of interest rate-sensitive momentum stocks that found respite from the persistent upward trend in Treasury yields. US Treasury yields retraced from 16-year highs due to the market’s acceptance of “higher for longer” interest rates. 

Several key data releases offered evidence that the Federal Reserve’s strategy was having the desired effect. The ADP report delivered a downside deviation of 41.8% in private sector job additions, marking a significant departure from expectations. Simultaneously, the report on factory orders presented an upbeat picture, surpassing initial estimates with a robust 1.2% increase month-on-month. The services sector also exhibited signs of softening demand, while mortgage rates reached new multidecade highs. Despite these developments in economic data, market participants are turning their attention to the upcoming employment report scheduled for release on Friday. This report is widely anticipated to reveal the addition of approximately 170000 jobs, with the unemployment rate and annual wage growth hovering around 3.7% and 4.3%, respectively. 

Technical 

The S&P 500 Futures tumbled on the backdrop of rising Treasury Yields. The index futures attempted to recover losses but were met with contention from selling pressure and woes concerning the release of non-farm payrolls tomorrow. Since selling pressure triggered a reversal at the 4299.50 level, the index futures may attempt to retest the 4247 support if the release of non-farm payrolls triggers a further pullback.  

However, weaker-than-expected labour market data could trigger a reversal towards the 4322.25 resistance at the 23.60% Fibonacci level. Since this level aligns with the 50-day moving average, a move above could mark a pivot point for a reversal.  

Summary 

The S&P 500 Futures slid in anticipation of the release of Non-Farm Payrolls on Friday. Positive macroeconomic data in the US has been a driver of downside momentum for the index futures, supporting the likelihood of additional rate hikes by the Fed. Hence, the NFP release could encourage a further pullback towards the 4247 support. Alternatively, a contrasting NFP figure could bolster the index futures towards the 4322.25 resistance. 

Sources: TradingView, Reuters