S&P 500 Futures pare intraday gains amid firmer T-bond yields

• S&P 500 Futures step back from record top amid anxious markets.
• Indecision over Fed’s next moves, covid concerns and pre-data caution weigh on sentiment.
• ISM Services PMI will be observed to confirm inflation pressure ahead of FOMC minutes.

S&P 500 Futures seem tired after an eight-day uptrend to the record top as risk appetite dwindles early Tuesday. Even so, the sentiment gauge stays near the all-time high surrounding 4,350 flashed today.

The return of US traders and cautious mood ahead of the ISM Services PMIs, coupled with the coronavirus (COVID-19) woes, could be cited as the key catalysts behind the recently subdued markets. Also contributing to the sluggish sentiment could be the indecision over the Fed’s next moves, following Friday’s mixed US jobs report.

Full markets reassess the odds of the Fed’s rate hike and hence stay sidelined before further detail to confirm the inflation pressure in the US. Additionally, the fears over a fresh covid variant, namely Epsilon, which resists vaccines join worsening covid conditions in Australia and Japan also probe the market bulls.

On the contrary, the UK and Germany measured optimism over the COVID-19 and resulted signal for unlock, as well as travel restrictions, keep buyers hopeful. Further, escalating vaccinations in the developing economies also challenge the bears’ entry.

Above all, US Treasury yields’ recovery moves seem to act as a frontline attack on the S&P 500 Futures. The 10-year coupon adds 1.4 basis points (bps) to 1.44% by the press time.

Looking forward, investors will keep their eyes on the Eurozone data for fresh impulse but US ISM PMIs will be the key. Should the details keep offering positive surprises, the Fed haws will jump back to weigh on the market sentiment.

Read: ISM Services PMI Preview: Why the inflation component could trigger a dollar rebound