Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher due to reported progress in the latest round of talks to increase the debt ceiling but there were no breakthroughs.
The first quarter U.S. gross domestic product increased 1.3% when up 1.1% was expected, and personal consumption expenditures increased 3.8% when an increase of 3.7% was anticipated.
Jobless claims in the week ended May 20 were 229,000 when 248,000 were predicted.
The April Chicago Federal Reserve national activity index was 0.07, which compared to 0.19 in March.
The 9:00 central time April pending home sales report is predicted to show an increase of 1.1%.
The May Kansas City Federal Reserve manufacturing index will be released at 10:00. In April the index was -10.
Stock index futures have performed well in 2023 despite a variety of bearish news and an ongoing hawkish Federal Reserve.
CURRENCY FUTURES
Higher U.S. Treasury yields continue to support the U.S. dollar.
The German economy was in recession in early 2023. Revised German GDP data revealed gross domestic product fell 0.3% in the first quarter of the year when adjusted for price and calendar effects. This follows a decline of 0.5% in the fourth quarter of 2022. A recession is traditionally defined as two successive quarters of contraction.
In spite of this, it is still anticipated that the European Central Bank will proceed with interest rate increases this year.
The retail sales balance in the U.K., as indicated by the CBI distributive trades survey, declined to -10 in May 2023, which compares to the previous month’s figure of +5. Analysts had anticipated a reading of +10.
INTEREST RATE MARKET FUTURES
The minutes from the FOMC meeting on May 3 showed policymakers were divided on the need for further interest rate hikes.
Federal Reserve speakers today are Thomas Barkin at 8:50 and Susan Collins at 9:30.
The Treasury will auction 7-year notes today.
Financial futures markets are predicting there is a 68% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its June 14 policy meeting, and there is a 32% chance of a 25 basis point increase.
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