S&P 500 Futures renew intraday low on Biden’s tax plans, yields keep recession woes on table

• Market sentiment sours as fears of higher taxes, hawkish monetary policies call for recession.
• S&P 500 Futures takes offers to refresh intraday low, reverses the previous day’s bounce off a one-week low.
• Benchmark US Treasury bond yields portray the widest differentials in many years, suggesting a rush to risk safety.

Risk profile again weakens early Thursday, following mixed moves the previous day, as headlines from the US join hawkish signals from the key central banks and top-tier data.

Amid these plays, S&P 500 Futures reverses the previous day’s bounce off a one-week low while refreshing the intraday bottom around 3,985. On the same line, the US 10-year Treasury bond yields rise to 3.99%, up one basis point (bp), whereas the two-year counterpart pares intraday losses near 5.05% at the latest. It’s worth noting that US yield curve inversion widened to the highest levels since 1981 and propelled the recession fears the previous day. That said, Wall Street closed mixed on Wednesday as traders failed to cheer mixed US data amid an absence of fresh directives from Fed Chair Jerome Powell.

That said, US President Joe Biden proposes raising corporation tax from 21% to 28% in his latest budget guide ahead of Friday’s release. Biden also aims for a 25% billionaire tax and large levies on rich investors. A likely lack of acceptance amid jittery economic concerns and political chaos due to the said budget proposal seems to weigh on the market sentiment of late.

Additionally, Fed’s Powell repeated his hawkish calls of readiness to lift the rate while highlighting stronger-than-expected inflation pressure. The same bolstered calls for the Fed’s 50 bps rate hike but the Testimony 2.0 didn’t have anything new from what’s already heard on Tuesday and hence traders were mostly afraid of taking any major steps.

Not only Fed’s Powell, but policymakers from the European Central Bank (ECB) and the Bank of England (BoE) have also defended their hawkish moves and marked overall tighter monetary policies at the major central banks, which in turn favor risk-off mood.

Elsewhere, disappointment from China’s inflation data also dims the prospects of recovery in the world’s second-largest economy and weighs on the risk profile. That said, China’s headline Consumer Price Index (CPI) dropped to 1.0% YoY versus 1.9% expected and 2.1% prior while the Producer Price Index (PPI) also declines to -1.4% from -0.8% previous readings and -1.3% market consensus.

Talking about the US data, the ADP Employment Change rose to 242K in February versus 200K market forecasts and 119K prior (revised). Further, the US Goods and Services Trade Balance dropped to $-68.3B from the $-67.2B previous reading (revised) and $-68.9B analysts’ estimations. It should be noted that the US JOLTS Job Openings for January improved to 10.824M versus 10.6M expected but eased from 11.234M revised prior.

Moving forward, US Initial Jobless Claims for the week ended on March 03 will join the Challenger Job Cuts for February to offer more details to predict Friday’s top-tier employment data, mainly the Nonfarm Payrolls (NFP).