US Treasury yields, S&P 500 Futures portray risk-off mood

• US 10-year Treasury yields print three-day downtrend around 1.23%, S&P 500 Futures extend drop below 4,400.
• Fed resists talking taper, Senators back debate on Biden’s infrastructure stimulus.
• Preliminary readings on the US Q2 GDP will be the key to watch going forward.

Market sentiment sours amid Thursday’s Asian session. As a result, the risk barometers, namely US Treasury yields and stock futures remain pressured despite some positives that might have favored bulls.

That said, the US 10-year Treasury yields print three basis points (bps) of a drop to 1.23%, down for the third consecutive day whereas S&P 500 Futures drops 0.17% by the press time.

The risk aversion takes clues from the Delta covid variant woes. Australia’s New South Wales conveyed 239 new cases for the 24 hours ending on July 28, the highest figures in 16 months, fueling the national number to the August 2020 levels.

On the same line, the US and the UK also witness a jump in the Delta covid variant of late. The same push Twitter to shut down offices in San Francisco and New York while the UK’s unlock is being questioned again. Additionally, Kyodo News said, "Japan's daily total of COVID-19 cases topped 9,000 for the first time on Wednesday, with a surge in infections in Tokyo casting a pall over the Olympics and putting pressure on the government of Prime Minister Yoshihide Suga to take stronger countermeasures."

On a different page, US policymakers backed procedural voting on President Joe Biden’s infrastructure spending plan. However, a bumpy road to the final passage and uncertainly over the budget limit challenges the optimism.

Elsewhere, US Federal Open Market Committee (FOMC) matched wide market expectations of announcing no monetary policy change while quoting “continuing economic improvement,” during the July meeting. However, the US Dollar Index (DXY) bears the burden of comments from Fed Chairman Jerome Powell who said, "Economy has made progress toward goals since setting the bar for taper in December and will continue to assess progress in coming meetings."

Looking forward, risk appetite may remain sour as the covid woes are widespread and challenging the economic recovery from the pandemic. However, today’s US Q2 GDP, expected 8.6% annualized versus 6.4% prior, should offer intermediate relief to the investors.

Read: US Q2 GDP Preview: Economy to continue to expand at strong pace, eyes on FOMC