Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower due to prospects of a hawkish Federal Reserve, along with weaker than expected corporate earnings reports.
The ADP employment report for April showed an increase of 192,000 when up 175,000 was anticipated.
The 8:45 central time April PMI manufacturing final is predicted to be 49.9.
The April Institute for Supply Management manufacturing index is estimated to be 50.0, and the 9:00 March Job Openings and Labor Turnover Survey (JOLTS) is expected to be 8.7 million.
The main event today is the Federal Open Market Committee statement at 1:00 and Federal Reserve Chair Powell’s press conference at 1:30.
There is a very good chance that Fed Chair Powell will pivot to a hawkish stance, which would reverse his dovish commentary at the beginning of this year. Stubborn inflation is the main reason that will probably influence the Federal Reserve to maintain higher interest rates for an extended period. Also, the central bank may announce a slower balance-sheet unwind.
CURRENCY FUTURES
The U.S. dollar index advanced to its highest level since November of last year.
Follow-through gains for the greenback are likely ahead of today’s Federal Open Market Committee statement.
U.K. manufacturing fell back into contraction as output and new orders both declined.
U.K. house prices unexpectedly fell for a second month, according to figures from mortgage lender Nationwide. House prices declined 0.4% month-on-month after a 0.2% drop in March. Analysts had expected a 0.2% increase.
INTEREST RATE MARKET FUTURES
Financial futures markets are predicting no change in the fed funds rate at the Federal Open Market Committee’s meeting today and no change at the June, July and September meetings.
However, there is a 59% probability of a rate cut at the November 7 meeting.
I would not be surprised to see the probability of a fed funds rate cut at the November meeting diminishing as we get closer to that meeting.
The fundamentals remain bearish, and lower prices are likely. However, the downtrend is subject to the possibility of a flight to quality flow of funds if geopolitical concerns intensify.
Interested in more futures markets? Explore our Market Dashboards here.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
