S&P 500 futures rose by 0.2%, and the index is set to move within reach of its first record since August after closing just a few points shy of a new high. The Nasdaq 100 could also retest its all-time peak, while Brent crude fell below $100 per barrel, helping to ease inflation concerns. Winners are holders of tech stocks and investors who did not panic in the bond market; losers are those who bet on a pullback because yields were rising. I believe the equity market is currently trading its own narrative, and for now, that story is decoupled from what is happening in the debt market.
Notably, the indices barely reacted to expensive energy and the return of inflation fears that sent yields and inflation higher around the world and forced central banks to raise interest rates. Instead, investors are focused on strong corporate results, resilient macro data, and explosive growth in AI-related investment. BNP Paribas Wealth Management says that this year's gains are being driven by earnings rather than multiple expansion. Its data shows that earnings-per-share revisions remain robust thanks to upward company guidance in the United States, and there is room for that dynamic to continue. For the market, that matters more than any headline about yields: as long as earnings rise, expensive bonds do not necessarily harm valuations.
Oil gave stocks an extra leg of support. Brent fell below $100 on increased exports from the Persian Gulf, discounted Aramco prices for Asia, and releases from G7 reserves. That eases cost pressures and, therefore, reduces the risk the Fed will have to tighten policy more than currently priced in. The market puts the odds of an October hike at about one in four, and the fed funds rate after September's move is seen in the 3.75–4.00% range.
Bonds are calmer. Treasuries ticked up slightly after the 10-year yield reached a 2002-era high the previous session, and the US dollar index was little changed. For equities, this is a breather, not a reversal: long-term rates remain near multi-year highs and continue to be the main risk to valuations.
In Europe, the Stoxx 600 rose by 0.7% and is headed for its first three-day winning streak in a month. Regional bonds are recouping losses from the lows, led by the usual laggards, France and Italy, and the euro was little changed after plunging to a 17-month low on Monday. That's a decent sign for the region, but it is too early to call a trend change: the spread of French bonds over German peers remains at its widest since 2011, and political uncertainty over France's budget and Spain's snap election has not gone away.
The coming days will deliver several tests. Today, the US Energy Information Administration publishes its short-term winter fuel outlook, Wednesday brings the minutes from the September Fed meeting, and this week, there are long-bond auctions in the US and Japan. A hawkish minutes release or weak auction demand could send yields back up and hit valuations, while dovish language and calm trading would support the indices.
In my view, the S&P 500 will likely hit a new record in the coming sessions, and the Nasdaq 100 should retain leadership, with earnings and AI investment sustaining optimism. However, the rally remains vulnerable to a jump in yields and a renewed surge in oil above $105 — either of which could turn a small pullback into a significant decline. European equities are likely to lag as long as Paris and Madrid remain sources of political risk.
On the S&P 500 technicals, the immediate task for buyers today is to overcome the resistance level of $7,793. That would signal upside and open the door to a push toward the next level at $7,810. Controlling $7,824 is also a priority for bulls, as that would strengthen their position. If the price moves lower amid a drop in risk appetite, buyers must show up around $7,774. A break below that level would likely drag the instrument down to $7,756 and open the way to $7,737.