Looking to the Futures
Treasury Notes Look for Support
US Treasury notes looked to gain some traction after selling off throughout the week. Equities were able to rally during yesterday's session following an overnight downtrend. Crude oil prices gave up their overnight rally, which pushed 10-year Treasury note yields lower. US economic data came in mixed on Wednesday.
Equity markets were able to regain steam during yesterday's session after an overnight sell-off. A majority of this rebound can be attributed to a pullback in crude oil prices, moving bond yields lower. Second quarter earnings have helped instill investor confidence with the S&P 500 tracking for earnings growth of nearly +32% in Q2, outpacing the projections of +23%. AI stocks are expected to account for most of this growth with AI infrastructure stocks contributing nearly 60% on the S&P 500's EPS growth in Q2. According to Bloomberg 86% of the 489 S&P 500 stocks that have reported have beaten the Q2 earnings estimates.
Crude oil prices saw a spike overnight with increased tension between US and Iran. The US has carried out multiple strikes over the past three days against radar systems along Iran's Southern coast. Iran retaliated with drone and missile strikes on US bases across the Middle East. However, oil markets stabilized after US Energy Secretary Wright stated that over 17 million bbl of oil went through the Strait of Hormuz on Monday and calmed the supply concerns.
US economic data came in mixed yesterday with the US Aug ADP employment change increasing +38,000, missing the expected rise of +47,000. US July factory orders rose +0.9% m/m, beating the expected increase of +0.7% m/m. July factory orders ex-transportation were +0.6% higher m/m, higher than the expected +0.4% m/m increase.
US MBA mortgage applications increased +0.8% in the week ending August 28, with the purchase mortgage sub-index +2.2% higher and the refinancing mortgage sub index down -1.1%. The average 30-year fixed-rate mortgage was +1 bp higher at 6.79% from 6.78% last week.
Global bond yields were mixed yesterday. The 10-year US Treasury note fell -0.4 bp to 4.794%. The UK 10-year gilt yield increased +1.4 bp to 5.234% and the 10-year German bund yield rose +3.3 bp to 3.376%.
Technicals
Looking at the daily chart for the 10-year US Treasury Note December 2026 (/ZNZ26) contract we can see significant selling pressure over the past week. The contract crossed below the 20-Day Simple Moving Average last Wednesday and was unable to regain that level before additional sellers stepped in. Yesterday, we saw some buyers step in on lower-than-average volume as the T-Notes look for a new support level.
According to the CFTC Commitment of Traders report released August 25th asset managers have decreased their long position by -70,985 contracts and decreased their short position by -77,562 contracts. Asset managers were net long 2,592,072 contracts as of the time this report was published.
The 14-Day Relative Strength Index at 36.64% indicates that the contract is moving towards oversold levels.
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