Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher as it appears more likely that the Federal Open Market Committee will lower interest rates at its September meeting rather than at the November meeting.
The 8:45 central time May PMI manufacturing final is expected to be 50.9.
The 9:00 May Institute for Supply Management manufacturing index is anticipated to be 49.8, and the 9:00 April construction spending report is predicted to show a 0.2% increase.
On Friday there was a one-day reversal to the upside on the S&P 500 daily chart.
The longer term fundamentals and technicals remain supportive.
CURRENCY FUTURES
The U.S. dollar index declined in the overnight trade.
The HCOB’s final euro zone manufacturing purchasing managers’ index increased to 47.3 in May from April’s 45.7, and was just under the 47.4 preliminary estimate.
The European Central Bank is expected to announce a 25 basis points reduction, its first interest rate cut since 2016 on Thursday, with markets anticipating a total of approximately 57 basis points of easing in 2024.
U.K. manufacturers reported a return to growth in May after a long slowdown. The final reading of the S&P Global U.K. manufacturing purchasing managers’ index for May improved to 51.2 from 49.1 in April, which is the highest level since July 2022.
INTEREST RATE MARKET FUTURES
Futures are mostly higher, especially at the long end of the yield curve.
The Atlanta Fed GDP now growth estimate for the second quarter came in at 2.7%, which is down from 3.5% on May 24.
There are no major speeches from Federal Reserve officials due to the blackout period before the June 12 monetary policy decision.
Financial futures markets are predicting there is a 56% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
Higher prices for futures are likely, especially at the long end of the curve.
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