Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher due to reports a tentative deal to increase the debt ceiling.
A tentative agreement was made in a phone call late on Saturday. The bill will suspend the debt ceiling until January 1, 2025, and federal spending will be capped for the next two years. A vote by the House will likely take place on Wednesday, before it goes to the Senate.
The 9:00 central time May consumer confidence index is expected to be 100.0.
The 9:30 May Dallas Federal Reserve manufacturing index is anticipated to be negative 19.5.
NASDAQ futures advanced to the highest level this year.
Stock index futures have performed well in 2023 despite a variety of bearish news.
CURRENCY FUTURES
The U.S. dollar is lower and appears to be forming a one-day reversal lower today. In recent weeks the greenback has advanced due to the belief that U.S. interest rates could stay elevated for longer than previously thought.
The economic sentiment indicator in the euro area declined to 96.5 in May 2023 from a revised 99.0 in April and below market expectations of 98.9.
Bank lending to households in the euro zone increased by 2.5% year-on-year in April 2023, which is the least since April 2017. This was the eighth consecutive month that the lending growth rate slowed. However, lending to companies increased by 4.6%, although this was the slowest growth rate since March 2022
The British pound advanced today, recovering from a two-month low hit on May 25. Additional interest rate hikes by the Bank of England are anticipated.
Japan’s unemployment rate declined to 2.6% in April from 2.8% in the previous month. The seasonally adjusted jobless rate was below economists’ median estimate of 2.7%.
INTEREST RATE MARKET FUTURES
U.S. Treasury yields declined as investors assessed the potential market impact of the tentative debt-limit agreement. The yield on the 10-year Treasury note fell to 3.73%. The two-year note yield declined to 4.51%, while that on the 30-year bond fell to 3.89%.
Thomas Barkin of the Federal Reserve will speak at 12:00.
Financial futures markets are predicting there is a 38% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its June 14 policy meeting, and there is a 62% chance of a 25 basis point increase.
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