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S&P 500 Futures Recap – Trade Date May 26, 2021
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The annual inflation rate in the US soared to 4.2% in April of 2021 from 2.6% in March and well above market forecasts of 3.6%. It is the highest reading since September of 2008, amid a surge in demand as the economy reopens, soaring commodity prices, supply constraints. There is also a base effect weighing as the coronavirus pandemic dented economic activity bringing the inflation rate to 0.3% in April 2020. The biggest increases were recorded for gasoline (49.6% vs 22.5% in March), fuel oil (37.3% vs 20.2%) and used cars and trucks (21% vs 9.4%). Inflation also accelerated for shelter (2.1% vs 1.7%) and new vehicles (2% vs 1.5%) and rebounded for apparel (1.9% vs -2.5%), but slowed for medical care services (2.2% vs 2.7%) and food (2.4% vs 3.5%). Meanwhile, compared to March, prices rose 0.8%, the most since 2009 while monthly core consumer inflation increased 0.9%, the most since 1996. source: U.S. Bureau of Labor Statistics
Chart of the Day
Wage Inflation Poses Biggest Risk in U.S. Consumer Stocks
Some industries hit especially hard by the coronavirus pandemic now face an outsized threat from wage inflation, according to Savita Subramanian, Bank of America Corp.’s chief U.S. equity strategist. In a report Tuesday, Subramanian compared the S&P 500 Index’s 11 main industry groups based on their use of labor. The consumer-discretionary group, which includes retailers, hotels and restaurant chains, employed the most people for every $1 million of revenue. They had almost six times as many workers as S&P 500 energy companies, which were the least dependent on labor.
Our View
The ES rallied up to 4194.75 on Globex and opened Wednesday’s regular session at 4192.00, before dropping down to 4180.50 in the first 30 minutes of the day session. After the early low, the ES did a little “back and fill” at the 4181 to 4184.50 area.
Nearly 30 minutes later, it traded up to 4192.50, pulled back, and then popped up to 4196.75. After the push, the ES pulled back and basically traded in a 5-point range.
The ES traded as low as 4,188.75 as the 3:50 imbalances showed $648 million to sell, but pared back to about $300 million to sell. It bounced and traded 4,194 on the 4:00 cash close and settled a quarter-point lower, up 4.5 points or 0.11% on the day. In terms of the ES’s overall tone, it firmed up nicely after the early pullback. In terms of the day’s overall trade, it was slow with only 1.036 million ES traded.
Our view: I’m sticking to my guns and am still looking for 4,230 to 4,240 by Friday’s close. I’m long from lower and will add on any 20-handle pullback. That’s all I have to say about that.
As we all know, there’s no crystal ball when it comes to trading stocks, options or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk free for 30 days.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Decisions to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
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